Ulrich Hess, project officer for agribusiness development at the IFC, claimed the group’s first project – working with farmers in Morocco to provide hedges against rainfall – has been a great success.
Speaking at Weather Risk 2002, the New York conference run by Risk News’ sister publications Risk and Energy & Power Risk Management, Hess said: "Global weather market players have not previously focused on emerging markets because they are still able to diversify their operations in the growing European and Japanese weather markets. But we hope this will soon change."
For its Moroccan project, the IFC created a precipitation index that allowed farmers to hedge against the impact of low rainfall on crop yields. The project already covers sunflower crops, and Hess said it would be extended to cereal crops by September, the start of the next season.
Hess claimed he has encountered some resistance from global reinsurance companies, which are large players in the weather market. "These companies are very open to the idea of getting involved in emerging markets, but working through the practical issues, particularly regarding access to data, has caused some problems," said Hess, adding that the Moroccan project took 18 months to set up.
The IFC intends to overcome the data issue by using satellites to collect and verify data – something that Hess hopes will convince new players of the market potential. The IFC is looking at new projects in Turkey, Argentina, Chile and Brazil, and already has a contract in place with a Mexican reinsurance company.