Liberty Mutual Re backs parametric flood and drought cover for Colombian farmers

By Henry Gale

May 16 - (The Insurer) - Liberty Mutual Reinsurance (LM Re) has expanded a parametric livestock insurance product piloted in Colombia last year to cover flood risks as well as drought.

The coverage is offered in collaboration with MGA XS Global and agricultural consulting firm SFA CEBAR. It uses data from Floodbase and EarthDaily Agro.

The Colombian government declared a state of emergency in November after flooding affected 188,000 people, according to the UN's Office for the Coordination of Humanitarian Affairs. As well as property, the floods destroyed crops and livestock.

Frequent cloud cover had hampered previous attempts at satellite-based parametric flood coverage in Colombia, LM Re said, but this product was able to overcome that issue.

"With farmers in Colombia routinely relying on annual loans to farm their land, should adverse weather cause a herd loss, many must sell land to repay the loan," said Jean-Christophe Garaix, head of agriculture and parametrics at LM Re.

"This product is designed to mitigate that risk, making farming much more resilient. It also simultaneously reduces the risk banks face in offering finance, creating the potential for cheaper loans, which will further help support resilient farming in Colombia.”