Background: Climate change poses significant risks to vulnerable communities worldwide, including those in Aceh Province, Indonesia. The region is home to a substantial population of poor farmers, with an estimated 808,718 individuals engaged in agricultural activities. Despite their reliance on agriculture for livelihoods, these farmers lack access to insurance coverage, exacerbating their vulnerability to climate-related risks.

Status quo: Currently, there is no agricultural insurance available in Aceh Province, leaving farmers unprotected against the impacts of climate change. The absence of insurance options has left many farmers trapped in a cycle of poverty, particularly when faced with crop failures. The phenomenon of “lintah darat,” or loan sharks, has become widespread among farmers who are unable to repay debts due to failed harvests. Consequently, many agricultural lands remain fallow as farmers are unable to afford the necessary inputs for cultivation.

Target group: Our project aims to address the needs of the 808,718 poor farmers in Aceh Province who are most vulnerable to climate-related risks. These farmers rely on agriculture for their livelihoods but face significant challenges due to the lack of insurance coverage and financial resources. By targeting this group, we aim to enhance their resilience and improve their ability to cope with climate-related challenges.

Main characteristics of the solution: Our project proposes the development and implementation of a climate risk insurance product tailored to the needs of poor farmers in Aceh Province. Key characteristics of the solution include:

  1. Affordability: The insurance product will be designed to be affordable for low-income farmers, with premiums adjusted based on income levels. Initial estimates suggest that premiums will range from [insert range] per month, making the product accessible to farmers with limited financial resources.
  2. Comprehensive coverage: The insurance product will provide comprehensive coverage against a range of climate-related risks, including floods, droughts, storms, and crop failures. This coverage will protect farmers against financial losses incurred due to adverse weather conditions, enabling them to recover more quickly from crop failures and other climate-related challenges.
  3. Accessibility: We will work closely with local agricultural cooperatives and community-based organizations to ensure that the insurance product is easily accessible to farmers in Aceh Province. This may involve setting up local distribution channels and conducting outreach programs to raise awareness and facilitate enrollment.
  4. Capacity building: In addition to providing insurance coverage, our project will focus on building the capacity of farmers to understand and manage climate-related risks more effectively. This may include training programs, workshops, and educational campaigns to improve their resilience and adaptive capacity.

Risks to be covered: The insurance product will cover a range of climate-related risks that are prevalent in Aceh Province, including:

  • Crop losses due to floods, droughts, and extreme weather events
  • Property damage caused by storms and landslides
  • Income loss for farmers due to disruptions in agricultural activities

By providing coverage against these risks, the insurance product will help mitigate the financial impact of climate-related disasters on poor farmers in Aceh Province and enable them to recover more quickly from adverse events.

The proposed insurance solution works by providing financial protection to poor farmers in Aceh Province against the adverse impacts of climate-related risks. Here’s how it works:

  1. Enrollment: Farmers who wish to participate in the insurance program will enroll by paying a premium, which is determined based on their income level and the level of coverage they desire. Enrollment can be facilitated through local agricultural cooperatives, community-based organizations, or directly through insurance agents.
  2. Risk Assessment: The insurance provider will conduct a risk assessment to determine the likelihood and severity of climate-related events in the area, such as floods, droughts, storms, and crop failures. This assessment will inform the pricing and coverage options offered to farmers.
  3. Coverage Period: Once enrolled, farmers will be covered for a specified period, typically one agricultural season. During this period, they are protected against financial losses resulting from climate-related disasters that affect their crops or livelihoods.
  4. Event Trigger: In the event of a covered loss, such as crop damage due to a flood or drought, farmers can file a claim with the insurance provider. The claim will be triggered based on predefined criteria, such as the severity of the weather event or the extent of crop damage.
  5. Claim Processing: Upon receiving a claim, the insurance provider will assess the validity and extent of the loss. This may involve on-site inspections, verification of crop yields, and other relevant documentation. Once the claim is approved, farmers will receive compensation for their losses.
  6. Compensation: The insurance payout will be disbursed to eligible farmers according to the terms of their coverage. This compensation can help farmers recover from the financial impact of crop failures, enabling them to replant crops, purchase food, or cover other essential expenses.
  7. Risk Management: In addition to providing financial protection, the insurance program may also offer risk management services to help farmers mitigate the impacts of climate-related risks. This may include access to agricultural training, weather forecasting information, and assistance with climate-smart farming practices.

By providing accessible and affordable insurance coverage, the proposed solution aims to reduce the vulnerability of poor farmers in Aceh Province to climate-related risks, enabling them to safeguard their livelihoods and build resilience in the face of a changing climate.

Further specification for the insurable interest / asset (agricultural production) may include:

  • Crop yields: Coverage for losses in crop yields due to climate-related events such as droughts, floods, storms, and pest infestations.
  • Livestock: Coverage for losses in livestock production due to extreme weather conditions, diseases, or other emergencies.
  • Farm infrastructure: Coverage for damages to farm infrastructure such as irrigation systems, greenhouses, and storage facilities caused by natural disasters or accidents.
  • Agricultural inputs: Coverage for losses incurred from damage or loss of agricultural inputs such as seeds, fertilizers, and pesticides due to unforeseen events.