Tearfund, a UK-based international humanitarian and development organization, has reported the first drought insurance payout of its kind in Nepal, helping vulnerable families avoid severe food shortages and deeper poverty following a failed harvest.
The payout was triggered through a parametric insurance product developed by Global Parametrics (part of Celsius Pro Group), which uses satellite data to monitor the amount of water available to crops.
The program aims to quickly release funding when drought conditions reach agreed thresholds to provide support to communities before the worst impacts are felt. Premiums are supported by Humanity Insured, a UK registered charity supported by the insurance industry.
According to Tearfund, the initiative is part of a wider pilot program designed to test new approaches to prospective financing in areas affected by climate-related disasters. Nepal’s payment is the third received globally under the program.
The US$100,000 payment enables Tearfund to provide emergency food assistance to 671 households in Bajura district, one of the areas worst affected by drought. Tearfund also distributed drought-resistant vegetable seeds, farm tools and agricultural training to 405 people, including 302 women and 103 men. Water collection tanks for minor irrigation were also installed in 176 households.
Working with local partner Nepal Fellowship International, Tearfund distributed basic food items such as rice, lentils, oil and salt to families facing severe food shortages after crop failures.
One of them is Bune Sunar, a 59-year-old blacksmith and farmer whose family has been surviving on limited supplies of corn and soybeans as food stocks dwindle. “I’ve never seen so much food in the house in my life,” he added.
Tearfund said the farming community in Bajura has experienced repeated climate-related challenges in recent seasons. Floods last summer damaged farmland and crops, and the following winter brought a severe drought that left fields dry and unproductive.
Bune Sunar traditionally grows wheat, millet and rice, harvesting enough grain to feed their families for several months each year. However, Tearfund said this year’s harvest would only provide enough food for a month. In addition to farming, he worked as a blacksmith, producing kitchen utensils and farm implements, and some customers paid him in grain instead of money. Tearfund notes that as harvests fail and food shortages increase, it is becoming increasingly difficult to feed a family of 11.
Pranaya Pandey Chhetri, Country Director of Tear Fund Nepal, said that as climate-related disasters intensify, access to financial protection mechanisms becomes increasingly important.
“The gap between the losses caused by global disasters and the funds needed to cope with their impacts is widening. People like Boone Sunar who are at risk of extreme drought and famine must have fair access to insurance. Having this emergency safety net means they can retain their assets, develop alternative livelihoods and avoid falling deeper into poverty,” she commented.
“We are increasingly worried about hunger and food shortages. Cycles of floods and droughts are making agriculture extremely challenging in Asia, including Nepal, and conflicts are disrupting global agricultural supply chains. This insurance innovation brings vital funding to support people on the front lines of the climate crisis. This payout is helping people maintain hope in the face of extreme food shortages.”
Mark Rüegg, CEO of Celsius Pro Group, said the payout demonstrates how parametric insurance products can provide practical, timely support to communities facing climate risks.
“This is a powerful example of how parametric risk transfer solutions can be used in a very practical way. Rapid, pre-arranged financial assistance can make a real difference to households struggling to maintain food security, build resilience and avoid falling further into poverty. This is the kind of practical support CelsiusPro Group hopes to provide to climate-vulnerable communities, and it is a privilege to be involved in work that has such a clear impact.”
Tearfund said the program reflects the humanitarian sector’s growing focus on anticipatory action, distributing funds before crises escalate to reduce suffering, protect livelihoods and build the resilience of vulnerable communities.