Farmers, fishers, MSMEs and other climate-vulnerable groups in Tonga can now access a new and innovative micro-insurance product that is designed to protect them against the adverse impacts of tropical cyclones.
This is after the UN Capital Development Fund (UNCDF) launched a climate and disaster risk parametric micro-insurance product in the country, now only the third in the Pacific region, besides Fiji and Vanuatu, to have such a scheme.

The product was developed by the Pacific Insurance and Climate Adaptation Programme (PICAP), in partnership with the Tonga Development Bank (TDB) and FijiCare Insurance and will be piloted in Tonga over the next 12 months.
By providing quick access to payouts within 10-14 days following a Tropical Cyclone, Tonga’s climate-vulnerable communities will have at their disposal a financial tool that will help them cope better and recover faster such events.

While launching the product in Nuku’alofa, New Zealand High Commissioner to Tonga, Mr. Matthew Howell, said: “Parametric insurance has a clear role in this effort to providing an effective, affordable, and appropriate risk transfer solutions to low-income households and in build their financial preparedness and resilience against climate change.

“The New Zealand Government congratulates UNCDF, the Tonga Development Bank, the Tongan government, and all other partners involved in bringing this product to Tonga.”

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

Funds will be sent directly to the either the bank accounts of policy holders or their mobile wallets when a ‘trigger event’ – such as a particular category of cyclone – is met, with no need to verify loss and damage.

Tonga is third most vulnerable country in the world to natural disasters, according to the 2021 World Risk Index, and the product is designed to help soften the blow of Tropical Cyclones on the most vulnerable.

UNCDF’s Regional Technical Specialist, Mr. Praneel Pritesh, said: “In our first year in Fiji, we managed to sign up 1388 beneficiaries and we are well placed to reach our target of 2000 beneficiaries for the inception phase which ends in 2022. In time, I am confident that similar numbers will be reached in Tonga too, helping create more financially resilient and prepared communities.

“We will also endeavor to leave no-one behind by ensuring that the Programme is responsive to the needs of women, people living with disabilities and other vulnerable groups and that they have access to the product.”

During the pilot phase, the underwriters, FijiCare, and local aggregator, TDB, will aim to sign up around 300 beneficiaries, before it is scaled up next year and made available to more people.

TDB will work closely with and consult local communities to build awareness about the product and monitor how it interacts with the country’s regulatory framework during this period.

PICAP is jointly implemented by UNCDF, the UN University Institute for Environment and Human Security (UNU-EHS) and UN Development Programme (UNDP) and is funded by the Governments of Australia and New Zealand.

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For further information contact: [Sheldon Chanel, Communications Officer at UNCDF/UNDP Pacific] sheldon.chanel@undp.org; website: https://www.uncdf.org/