In Africa alone, there are around 300 million smallholder farmers, most of whom are not financially protected against crippling climate risks like floods and droughts.
Small farmers are especially vulnerable to drought because many do not have access to irrigation technology and rely on rain for their crops. that makes the base of their livelihood and main source of food incredibly precarious.
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Usually this is where insurance can be invaluable, but in this part of the world, weather insurance is either too expensive or non-existent. In low-income countries, less than 3% of the farming population ends up getting agricultural insurance, according to the November 2021 ISF report.
For insurance companies that rely on traditional tools for distribution, pricing, and claims handling, protecting small farmers from devastating weather events is often not financially feasible. the lack of meteorological infrastructure, for example, amplifies this even more. There are far fewer land-based weather stations in Africa than in Europe or the United States, and almost 90% less than the minimum recommended by the World Meteorological Organization.
This lack of data means that weather forecasts are often inaccurate and there are few early warning systems for cyclones, droughts and intense floods.
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This deters both insurers and reinsurers from doing business in emerging markets, making insurance unavailable or too expensive for the people who need it most.
The Lemonade Crypto Climate Coalition, funded by the Lemonade Foundation, was formed to address this problem by solving three main challenges: accurately quantifying climate risks; automate claim evaluation; and providing adequate financing and reinsurance.
The Lemonade Crypto Climate Coalition brings together leading industry partners with expertise in various fields to work together to solve these challenges. avalanche, chainlink, and daostack will contribute their extensive knowledge of blockchain technology, while lemonade, etherisc, hannover re, pula, tomorrow.io, and tomorrownow.org will create fully automated and highly accurate weather insurance models.
The coalition is being formed as a decentralized autonomous organization (DAO), dedicated to building and distributing insurance at cost, based on a green proof-of-stake blockchain.
the cryptoclimate lemonade coalition will focus on innovating the following:
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Accurately quantifying climate risksthanks to our coalition partners, we plan to use new technologies and data sets to price policies and pay claims. tomorrow.io generates actionable weather information using proprietary data and models, soon to be supplemented by dozens of radar-equipped satellites. this technology produces granular datasets, generating models that will be programmed into our smart contract and automatically calculate the precise premium to secure crops based on the location, size and topographical properties of the field.
automated claims evaluation highly accurate weather readings are important for pricing, but are also invaluable for evaluating events that have already occurred. By parametrically measuring the amount of rain, or lack of rain, on a insured crop field, smart contracts will automatically trigger flood or drought claims, paying farmers without them having to file a claim. the use of autonomous smart contracts and high-precision weather sources reduce the cost of handling claims to zero.
financing and reinsuranceusing the blockchain as a platform, a capital pool will be created to provide insurance capacity. crypto investors will be able to stake capital in the pool and potentially receive a portion of the premium paid by the farmers. Using blockchain in this way will substantially reduce the cost of capital and reinsurance, further reducing the cost of insurance.
We’re excited for this rare opportunity to bring together some of the most innovative companies on the planet to solve a pressing problem. While all coalition members have their own day-to-day businesses, this is a unique opportunity to join forces and make a collective impact.
This is also a watershed moment for blockchain, which will be used to help protect the most vulnerable farmers from unpredictable and catastrophic weather events.
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