The insurance initiative is attempting to tackle climate change, one of coffee’s most pressing threats as coffee-producing regions throughout the world have experienced increased periods of excessive rains or drought during the critical coffee plant development and harvest seasons.
“Smallholder coffee farmers are subject to immense risk as unpredictable and adverse weather conditions can have detrimental effects on coffee crops,” Nespresso and Blue Marble said in a recent joint announcement. “There is a lack of suitable insurance options available to these farmers.”
The program involves an emerging insurance type referred to as weather index insurance (WII). With WII plans, payouts are made not based on volume of output or market prices, but based on weather indices such as local rainfall or drought time. For example, if a micro region receives X amount of rainfall within a given timeframe, participating farmers in that region receive an automatic insurance payout.
“Our changing climate poses serious threats to the livelihoods of coffee producers, especially smallholder farmers,” said Joan Lamm-Tennant, CEO and founder of Blue Marble. The socially driven insurance company is backed by a consortium of nine different larger insurance companies, with the goal to provide impactful, commercially viable insurance to underserved people.
The pilot program is involving some 1,975 farmers across 5,724 hectares who are part of the Aguadas and Norte de Caldas cooperatives in Caldas, Colombia. Colombian exporting company Cafexport and Fairtrade International are joining Nespresso and Blue Marble for implementation. According to Nespresso, cooperatives have democratically chosen to use their Fairtrade International premiums to pay for the WII program. Nespresso did not specify the amount of private investment in the initiative.
Nespresso said the pilot program has generated interest from the Colombian Coffee Grower’s Federation (FNC) for potential expansion of the insurance system to other growing regions, while adding that the companies are continuously working with farmers to help design and to potentially scale the program.