In Banban area of Luganville in Vanuatu, entrepreneur and single mother, Adeline Tiobbi, sells aloe vera oil to supplement her income and provide for her two sons.

Ms Tiobbi works as a nurse at a hospital on the island, and the money she earns from her side business helps pay for her sons’ school fees and cover other household expenses.

Similar to many residents of Vanuatu and the Pacific Islands in general, her business is vulnerable to climate hazards, in particular cyclones, which are intensifying and becoming more frequent according to the UNU-EHS Interconnected Disaster Risks 2020/2021 Report.

When category 5 Tropical Cyclone Harold directly hit Santo in 2020, Ms Tiobbi, like much of the country, was devastated and had few financial options to bounce back quickly.

“My little processing hut was flattened and my aloe vera patch was completely destroyed by the fallen branches from the surrounding trees in a matter of hours,” she recalled.

When the cyclone had passed, Ms Tiobbi went through the stressful experience of not knowing where or how to start rebuilding her business.

This is the reality for many farmers in Vanuatu, with a recent UN Capital Development Fund (UNCDF) demand study showing that it took people between three to six months to recover from a natural hazard without any external financial support.

Vanuatu is ranked as the world's most at-risk country for natural hazards, such as tropical cyclones, droughts and flooding, by a UN University WorldRiskIndex.
At present, there are no disaster risk financing instruments available in Vanuatu to provide immediate financial relief to low-income households following a natural disaster.

Small business owners like Ms Tiobbi cannot afford the available commercial insurance schemes in the country.

“At the time of the cyclone I was not in a good financial position, and I never took up insurance because my business was still in its nascent stage where I could not afford such high premiums,” she said.

This could change with the introduction of the Pacific Insurance and Climate Adaptation Programme’s (PICAP) new climate and disaster risk parametric micro-insurance product.

Launched in Fiji in August 2021, the programme plans to go regional in the coming years, with Vanuatu a prime target due to its vulnerability to natural disasters.

“With encouraging early results and enthusiasm from stakeholders, the UN Capital Development Fund has ambitious plans of regional expansion into Vanuatu early in 2022 and later to Tonga as well,” said PICAP Programme Manager, Krishnan Narasimhan.

“Initial discussions with Vanuatu private sector and other key stakeholders is underway to make available a suitable weather index microinsurance product before the 2022 cyclone season.”

According to Ms Tiobbi , the market-based product could provide much-needed financial protection for farmers and MSMEs in Vanuatu.

PICAP is jointly administered by UNCDF, the UN Development Programme (UNDP) and UN University’s Institute for Environment and Human Security (UNU-EHS). The regional programme is supported by Governments of Australia and New Zealand.

The Fiji product offers cover for cyclonic storms, with both carrying a maximum coverage of FJ$1,000 (53,942 VUV), to be paid out within 14-21 days following a tropical cyclone. Some other benefits include:

• Payouts are based on the severity of the cyclone with no lengthy assessments needed
• The premium costs FJ$100 (5,394 VUV) a year, which equates to less than FJ$2 (108 VUV) a week
  
  Ms Tobibi hopes the parametric product can help Vanuatu’s low-income communities secure themselves and their assets, and avoid the stress and financial uncertainty that usually follows a natural disaster.