The Thai subsidiary of Sompo Japan Insurance said that it will begin selling Weather Index Insurance in an effort to mitigate losses accompanying damage sustained by farmers due to drought in Khon Kaen province in northeast Thailand.
The sale of the insurance is occurring as part of a trial project being conducted in Thailand by the Sompo Japan Group in cooperation with Japan Bank for International Cooperation to verify the insurance’s functionality as a climate change adaptation measure.
In 2007, JBIC studied the possibility and potential of Weather Index Insurance for Agriculture together with Sompo Japan group and other experts in climate change and insurance products.
According to Sompo Japan, the Weather Index Insurance will pay out a contractually predetermined insurance payout (equivalent to 15% or 40% of the financing to which the insurance is subject)
should the observed result of accumulated precipitation as measured against the Thai Metrological Department accumulated rainfall index fall below a determined value for the three month period from July to September.
The insurance premium levels are approximately between JPY1,000 and JPY5,000 per farmer. The policy holder would be Bank for Agriculture and Agricultural Cooperatives. Should insurance payments be required due to drought, Sompo Japan will pay such payments to BAAC who will pay the amount to the farmer, the company said.