In disaster-prone and resilient Vanuatu, a payout of parametric insurance claims following Tropical Cyclones Judy and Kevin in March provided an important first test for the novel financial solution.

The two cyclones caused widespread damage and affected the lives of some 250,000 people in the island nation, consistently ranked as among the most climate-vulnerable countries in the world.

They wreaked havoc on agricultural lands, destroying crops and livestock and threatening the livelihoods of many farmers.

But the cyclones also provided a first test for a novel parametric micro-insurance scheme developed and launched by the UN Capital Development Fund’s (UNCDF) Pacific Insurance and Climate Adaptation Programme (PICAP) in November, 2022, and offered in the market by private firm, VanCare Insurance Limited.

The product was designed to provide quick payouts following tropical cyclones to support the recovery of farmers, fishers and MSMES, who have few post-disaster financial options besides waiting for assistance or dipping into what limited savings they may have.

Oline Solomon, Victor Naut and Wilson Popovi were among the 84 beneficiaries, out of the 122 that bought the product in the pilot phase, to receive the first historic payout of claims in Vanuatu totaling 2.8 million Vatu (US$23,682).

The three of them took the proactive step of obtaining parametric insurance cover to protect themselves against unforeseen events, like cyclones, knowing they would need financial assistance to re-build once it had come and gone.

Oline Solomon, Civil Servant in Port Vila
Ms Solomon, an employee of Vanuatu’s Land Transport Authority, says she bought the insurance product to avoid having to re-build again after a cyclone with little to no outside assistance.

Ms Oline Solomon

As a resident of Port Vila, the capital, Ms Solomon says the biggest challenge she faces with cyclones is damage to her home. This was yet again the case when Cyclones Kevin and Judy hit Vanuatu within 72 hours of each other in March.

“I signed up for the insurance scheme because every time the cyclone comes, we sometimes find it hard to get the relief and then pay for the damage that the cyclone has done to us,” she said.

Ms Solomon received a payout within 14 days of the cyclone and the quick access to funds allowed her to repair her family home and restore normalcy in her life.

“The money helped me with paying for [the repair] of the iron roof that was damaged,” she said.

She said having insurance cover against cyclones for the first time in her life gave her peace of mind and a sense of confidence that this time, she would be able to better cope with the shocks.

Wilson Popovi, Farmer, Tanoliu Village
Mr Popovi, a crop farmer from the coastal Tanoliu Village, said he was relieved to receive prompt payouts from the insurance scheme following the two cyclones, which damaged his farm and reduced his income.

Mr Wilson Popovi

This quick financial support alleviated the burden he faced and helped him rebuild the farm, purchase new seeds, and resume selling his crops at the local market.

Mr Popovi was able to bounce back stronger and quicker than before and he is already drawing up a budget to purchase the scheme for the next cyclone season.

“I have advised the people in my village to join this insurance [scheme] because… in disaster time, it can really help you,” he said.

Victor Naut, Farmer in Erakor Village
Mr Naut runs a small kava bar from his village near Port Vila. Kava is a popular non-alcoholic local drink and export commodity that is made from a root crop and served at local bars in a coconut shell.

Mr Victor Naut

Mr Naut grows kava in his compound and uses it to supply the bar which is his main source of income. But the twin cyclones in March damaged the structure that houses the bar, and he could no longer safely host any customers until it was repaired.

That changed when VanCare processed the parametric insurance payouts and Mr Naut could purchase the required materials for the repairs. The financial support helped revitalize the bar and his income has since been restored.

Besides providing financial relief, parametric insurance has also instilled Mr Naut with a sense of security and confidence to continue investing in his farm and kava bar. He plans to purchase the product again for the next cyclone season and has encouraged others in the community to do the same.

The story of the three farmers is an inspiring example of how parametric insurance can build the financial resilience of climate-vulnerable communities against extreme weather events by providing quick post-disaster assistance.

VanCare Insurance
For the insurer, VanCare, a subsidiary of UNCDF’s Fiji-based partner, FijiCare Limited, the first payout has set a positive tone for the further development of parametric insurance products in the Vanuatu market.

VanCare Chief Operating Officer, Lemeki Kororua, said they have noticed an increased interest from the community to sign up for the existing parametric insurance scheme. The firm has also received requests for the scheme to be expanded to include perils such as earthquakes, landslides, and flooding, Mr Kororua said.

Mr Lemeki Kororua

“The parametric and micro-bundled products have helped to stamp our mark in the [Vanuatu] market,” he added.

“We are having a great partnership with UNDP/UNCDF, and we are looking forward to a great future ahead of us with all the products that we are introducing.”