Farmers, fishers, smallholder farmers, market vendors and small business owners will soon have access to a new parametric micro-insurance product, designed to help them meet their immediate needs after tropical cyclones, and other extreme events. 

The insurance was launched by the United Nations Capital Development Fund (UNCDF)'s Pacific Insurance and Climate Adaptation Programme (PICAP) and the Tonga Development Bank in Nuku'alofa just as Tonga enters its annual cyclone season.

The product offers immediate financial support for extreme natural climate events, specifically tropical cyclones, which have a wide-ranging impact on the country.

For Tonga’s most vulnerable communities including, farmers, fishers and Micro Small, and Medium Enterprises (MSMEs), it will improve their financial security and the climate risk resilience of Tonga’s population.

The product offeres two covers of T$1000 and T$2000 respectively against cyclonic winds, with premiums capped at 8% per annum of the sum insured.

UNCDF Regional Technical Specialist, Praneel Pritesh said, “a key strength of parametric insurance is that policy holders will receive a payment as soon as a disastrous event occurs, with no need to verify the losses.

“It will help Tongan communities meet immediate consumption needs like food, water, home repairs and so on, creating more resilient communities in the process”.

The first year the product was launched in Fiji, 1388 recipients signed up with an aim to increase to 4,000 this year.

New Zealand High Commissioner, HE Mr Mathew Howell said, “the New Zealand Government, as the principal supporter of PICAP, has been impressed with the Program’s results and we fully support the initiatives in Tonga and beyond.

In October 2021, New Zealand committed to spend NZ$1.3 billion in grant-based climate finance between 2022 and 2025.

“This underlines the importance that New Zealand attaches to global and regional efforts to work together to combat climate change, and at least half of this climate finance commitment will support Pacific countries”.

Once the product is successfully trialed, it will be made available to the mass market, just like in Fiji and Vanuatu, and to make signing up even easier, those who are interested will be able to purchase the product digitally.

The Australian High Commissioner, HE. Rachael Moore said, “the product launch comes at a critical time as the country goes into its cyclone season and as global leaders, including our vocal Pacific leaders, advocate for strong climate action at COP27 in Sharm-el-Sheik, Egypt, this week.

“Australia is a proud and long-time supporter of UNCDF and the ambitious PICAP initiative, and we believe in resilient, strong and stable Pacific communities as bedrocks of a strong, stable, and prosperous Pacific region.

“The product will aid in the fight against what we consider to be the region’s foremost challenge; climate change.

“It is designed for low-income households, including people with disabilities, means the most vulnerable in our society will for the first time have insurance protection against climate hazards.

“By supporting the development of parametric insurance, our hope is that it adds a layer of protection to Tongan communities facing down extreme weather events on a much more regular basis than in the past”.

PICAP is jointly implemented by UNCDF, United Nations University - Institute for Environment and Human Security (UNU)-EHS) and UNDP Pacific Office in Fiji.The Programme is supported by the New Zealand Ministry of Foreign Affairs and Trade and Australian Department of Foreign Affairs and Trade.