Introducing new and scaling existing climate risk parametric insurance products in Fiji

Fiji is highly exposed to natural hazards, with cyclones and floods being annual events that inflict significant damage to property and cause long-term economic harm. To strengthen the resilience of vulnerable households and individuals against these adversities, the InsuResilience Solutions Fund (ISF) is co-funding the development and implementation of parametric insurance products along with the Reserve Bank of Fiji, SUN Insurance, and Tower Insurance.

Fijians are particularly vulnerable to climate risks, as exemplified by Tropical Cyclone Winston in 2016, which brought wind speeds up to 325 km/h, caused USD 600 million in damages, and affected more than 60% of the population. Households with lower-to-moderate income (LMI) in Fiji employ various coping strategies to deal with these disasters, including reducing food consumption, withdrawing children from school due to unaffordable school lunches or bus fares, borrowing money, or taking funds out of their retirement savings. The National Financial Inclusion Strategy 2022-2030, released by the Reserve Bank of Fiji (RBF), highlights that climate-related insurance uptake is as low as 2%, hindered by lack of access to suitable products and affordability.

To enhance the resilience of vulnerable populations against these challenges, the ISF is co-funding the development and implementation of climate risk insurance products in collaboration with the Reserve Bank of Fiji as the project lead, and with local insurance companies SUN Insurance and Tower Insurance. The project’s objective is to provide an affordable solution to low and middle-income households and small and medium-sized businesses (SMEs) by offering market-based climate and disaster risk financing (CDRF) instruments tailored to the specific needs of Pacific communities.

The project partners have successfully piloted two index-based insurance solutions: a standalone high windspeed cover and a combined cyclonic storm cover for high wind speed and heavy rainfall. Building on the successful pilots, the aim is now to introduce new products and test multiple variants, including bundled insurance covers for wind, rain, and fire for micro, small, and medium-sized enterprises (MSMEs) as well as standalone rainfall products.