Drought triggers £261K parametric payout for Pakistan’s chilli farmers

A severe drought in Pakistan has triggered a £261,243 parametric insurance payout to Tearfund, directly supporting chilli farmers in the southern region of the country.

The payout was triggered by a severe period of hot and dry weather resulting in reduced soil moisture in parts of the country.

This innovative parametric product uses satellite data to determine the availability of water for crops. When the estimated moisture conditions fall below a pre-agreed threshold in a defined timeframe, the payout is automatically triggered.

This quick action helps vulnerable communities to secure food, avoid selling assets and proactively improve their food security.

The risk transfer product was developed by Global Parametrics (a Celsius Pro company) and funded by UK charity Humanity Insured.

The risk capacity is provided by the Natural Disaster Fund (NDF), backed by the UK government and Germany’s development bank KfW, with risk sharing from Hannover Re.

Tearfund’s Country Director in Pakistan, Jonathan Johnson, said: “What we’re seeing now is the beginning of a drought that could have devastating consequences for livestock as well as for human lives and wellbeing. Now that a payout has been triggered by these conditions, we are able to act quickly and in anticipation of the very worst scenarios.

“We plan to support 3,000 families – that’s around 18,900 people facing drought – with food relief, clean water for drinking, hygiene kits, suitable seeds for planting when rains eventually come and veterinary support to ensure livestock and livelihoods are protected through this difficult period of drought.”

The severe drought triggered the highest payout available for the parts of Pakistan where Tearfund and partners are working to help communities adapt to the effects of climate change.

Johnson added: “Traditional models of aid can be too slow to prevent the worst of a hunger crisis. This new way of pre-emptively financing relief efforts protects small-scale farming communities from drought induced hunger and secures the progress Tearfund has made building resilience to the climate crisis. People at risk of extreme drought and famine must have fair access to insurance models like the one Tearfund is piloting here in Pakistan.”

This marks the second payout that Tearfund has received this year, following a successful one in Malawi in February, demonstrating the effectiveness of this pilot program, Tearfund noted.

Charlie Langdale, CEO of Humanity Insured, commented: “Humanity Insured exists to make insurance accessible to stop people from falling into poverty because of disasters. The recent drought triggered payout in Pakistan for smallholder farmers is a clear example of how innovative insurance can deliver immediate, lifesaving support. Families will now have access to food, clean water and livestock vaccinations – critical resources in the face of extreme conditions. This is the power of insurance protection for those on the climate frontline, and exactly what Humanity Insured is committed to scaling, for millions.”

Mark Rueegg, CEO of CelsiusPro, said: “I am delighted that the team at CelsiusPro Group has developed the innovative drought risk transfer solution that, supported through the Natural Disaster Fund, is delivering critical support to vulnerable farming communities in Pakistan.

“This payout demonstrates how pre-arranged, parametric risk financing can enable rapid, targeted humanitarian action when and where it is needed most. We commend Tearfund for their leadership in pioneering this model and Humanity Insured for making it accessible. Through public-private collaboration and smart financial instruments, we are charting a more resilient future for communities on the frontlines of climate change.”

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