Etherisc

There are an estimated 270-500 million smallholder farmers in developing countries. However, 97% have no agricultural insurance (MIN, 2022). In Burkina Faso, we understand that out of the approximately 50,000 farmers that WFP works with, only 4,000 have benefitted from agricultural index insurance to date. This indicates a need to create more scalable, cost-efficient solutions.

In addition, most smallholder farmers globally do not have access to climate risk insurance. Even where it is available, the uptake of insurance solutions lags behind due to lack of affordability, delayed pay-outs and a lack of transparency. For example, even WFP needs to subsidise most of its index insurance programmes. Most index insurance programmes payout 3-6 months after the end of the season (120 days in WFP's experience), by which time farmers' households may have already faced a food crisis, livestock death, interrupted schooling, or other impacts to their livelihoods and well-being.

Etherisc has created an open-source, blockchain-based technology platform - the Generic Insurance Framework - which allows the end-to-end automation of parametric insurance products using smart contracts on a blockchain (compatible with all Ethereum Virtual Machine chains). Whether or not an insured event has occurred is autonomously verified based on connected data sources, like weather satellites. In the case of Burkina Faso, Etherisc's blockchain platform will be integrated with Yelen's platform for farmer exposure data and with ARC's platform for weather index values.

Etherisc will produce the final claims trigger and Yelen Assurance will execute the claims payouts. This will produce a single source of real-time claims data, while removing the need for each stakeholder to separately verify weather data before claims are paid out. In turn, this will enable claims to be paid faster - or even automated - while also helping to cut down costs due to automation and removal of unnecessary manual steps. By leveraging the ability of blockchain technology to track real-time transactions, more transparent monitoring by all stakeholders will be enabled.

Etherisc is already reaching 80,000 farmers. Results from a 2021 pilot with Acre Africa demonstrated the impact farmers felt. 

In comparison to the prior season - where blockchain was not used - Mercy Corps Ventures found that:

1) Cost reduced by 80% for Acre Africa's product, translating to a 27% increase in sum insured (customer value) for smallholder farmers.

2) Claims payout time reduced significantly from a standard of 45 days to under one week (40% of payouts within 24 hours).

3) 58% of farmers reported better onboarding, communication, and access to information on their insurance policy compared to the previous agricultural season, thanks to a USSD tool for instant STATUS updates.

In 2023, Etherisc further helped to protect 7,000 farmers under the Lemonade Climate Crypto Coalition partnership.

The project in Burkina Faso initially aims to reach 4,000 farmers. After the 2023 planting season, the team hopes to scale up this number, together with project partners ARC Ltd. and Yelen, locally, as well as more widely across the region. For example, WFP currently works with a total of 50,000 farmers in Burkina Faso, while ARC Ltd. has a disaster risk management footprint across 35 African countries. Accordingly, Etherisc is pleased to have signed an MOU with ARC Ltd. and Yelen thanks to the support of WFP.

Secondly and more fundamentally - despite some success in reducing costs - Etherisc and WFP have observed that climate risk insurance at unsubsidised rates is still unaffordable for most smallholder farmers. Many programmes are subsidised, but with worsening fiscal challenges, this is not a sustainable solution for the future and calls for a way for farmers to improve livelihoods as well as an alternate financing source. Etherisc's next step of business model growth will incorporate blockchain to make climate risk insurance affordable for millions of vulnerable smallholder farmers. This will be done by allowing farmers to earn extra income from carbon markets while concurrently fighting climate change with carbon farming activities.

Beyond climate risk insurance, Etherisc's Generic Insurance Framework platform also supports other kinds of parametric risk transfer, such as flight and train delay cover, carbon offsets cover, and most recently launched, stablecoin depeg protection. Some of these use cases even work with risk pools managed directly by smart contracts on Etherisc's platform for additional efficiency and transparency.

Interested parties can follow Etherisc's work on their blog and via weekly updates.