Samoa is on the frontlines of climate change, where extreme weather events are becoming an all-too-common reality.

Cyclones, flooding, droughts, and rising sea levels are occurring more frequently and with greater intensity, resulting in devastating effects on people's lives. According to the Samoan Ministry of Finance (Samoa 2040: Transforming Samoa to a higher growth path), Cyclone Evan in 2012 caused damages and losses amounting to 30 per cent of GDP (US$203.9 million) and the recovery process took years.  Rural communities, particularly those dependent on farming, were among the hardest hit, facing challenges that made rebuilding difficult. Vulnerable groups, including women, youth, and persons with disabilities, face even greater challenges when trying to recover from these events.

In Samoa, climate shocks have a disproportionate impact on farmers, fishers, and Micro, Small, and Medium Enterprises (MSMEs). With MSMEs making up over 96% of all businesses in Samoa and are crucial to the economy, their role in driving economic growth and employment cannot be overstated. At the same time, agriculture remains deeply embedded in Samoan life. The 2019 Agriculture Census recorded 28,516 households, 94.3 % (26,900) of these are agricultural households meaning they grew some crops or raised some livestock. Additionally, exports from agriculture and fisheries account for approximately 30% of the GDP. This highlights the importance of establishing strong support systems to improve resilience against climate-related disruptions in the agriculture sector, given its wider importance to Samoa’s economy and food security.

To address these challenges, Samoa Surety Insurance (SSI), partnered with the UN Capital Development Fund, through the Pacific Insurance and Climate Adaption Programme (PICAP), to launch a parametric microinsurance product focused on protecting farmers, businesses and the country’s climate-vulnerable communities in October 2023. SSI’s pilot product provides coverage against cyclone/heavy winds usually experienced during the cyclone season from November to April.

PICAP is a multi-year Programme that is jointly implemented by the UN Capital Development Fund (UNCDF), UN Development Programme (UNDP) and UN University- Institute for Environment and Human Security (UNU-EHS). The Programme is supported by the Governments of Australia, New Zealand and the United Kingdom and has a presence in Fiji, Tonga, Vanuatu, Papua New Guinea, Solomon Islands, Kiribati, and Tuvalu. By leveraging lessons learned from these countries, PICAP aims to effectively support local partners in building a climate-resilient Samoa using parametric insurance.

UNCDF’s 2023 Demand Side Survey in Samoa revealed that out of the 437 individuals interviewed, 253 had been affected by a natural hazard. Of these 253, 73% reported being impacted by cyclones.  While there is demand for cyclone/heavy wind cover, weather-based events are not the only insurable risks the average Samoan household faces. The costs of many unexpected events, such as suffering from a personal accident or housefire or even the high cost of funerals, take a significant toll on the savings and incomes of Samoan households. Despite this, the uptake of insurance in Samoa remains relatively low at 21%, highlighting the need for accessible and affordable solutions. Obtaining multiple individual insurance products to cover various events can be time-consuming and expensive. However, thanks to an innovative solution from SSI, a new micro-climate change product has been developed. This product covers existing risks in a single, bundled offering.

“By bundling household insurances alongside our innovative parametric cyclone product, we can enhance the protection available to not only Samoa’s most climate-vulnerable but to all Samoans, offering a comprehensive and affordable package,” said Peter McPherson, SSI General Manager.

SSI’s innovative Micro-Climate Change product provides a comprehensive and affordable insurance solution tailored to the needs of Samoan households. The centrepiece of the offering is a parametric cyclone cover with a sum insured of WST 1,000 (USD 352). This component provides rapid payouts, typically within 7 to 21 days following a trigger, pre-determined based on the storm's path and wind speed. Complementing the cyclone cover are four traditional insurance products, each addressing specific risks faced by individuals and families. These include term life insurance with coverage of WST 3,000 (USD 1,055) to ensure financial security for families in the event of the policyholder’s death, and funeral insurance worth WST 2,000 (USD 703) to ease the financial burden during funerals, a significant cultural event in Samoa. Additionally, the bundle offers personal accident insurance with a WST 3,000 (USD 1,055) cover, providing support against loss of income or disability from accidents, and housefire insurance, also with coverage of WST 2,000 (USD 703), to protect homes and belongings from fire-related damages.

With a premium of only WST 112 (USD 39) per annum and a total coverage value of WST 11,000 (USD 3,900), this bundled product is affordable and comprehensive. Claim payouts are made through mobile wallets (M-Tala/MyCash) and bank transfers, ensuring convenience and prompt access to funds.

By bundling these products, Samoa Surety is not only addressing the financial risks faced by individuals but also promoting a culture of preparedness and resilience against natural hazards. One year after the initial launch of their bundled product in October 2023, SSI’s cover for cyclones and heavy wind has now reached 500 households, paired with these additional products.

“Insurance is not just a luxury, it’s a necessity, and we want to have it available to the entire community. By bundling our products together, we have grown from 16 original members to over 500 households,” said Aloali'i John Low, SSI’s Managing Director.

The significance of this achievement extends beyond Samoa’s shores. The bundling of parametric and indemnity-based products is a first in the Pacific insurance industry, showcasing Samoa as a pioneer in innovative insurance solutions in the region. This model has the potential to inspire other countries, particularly in the Pacific region and other developing markets, where insurance penetration is similarly low, and the risks of natural disasters are high.

The region’s insurance industry will undoubtedly be watching SSI’s innovation closely. If this model proves successful, bundling parametric products alongside traditional indemnity-based insurance could serve as a blueprint for making insurance more inclusive and accessible in other countries. The insurance and climate resilience challenges in Samoa will not be solved overnight, and parametric insurance alone will not solve all the country’s disaster risk financing challenges. However, the introduction of this innovative bundled product is a step in the right direction.

It demonstrates that insurance can be responsive and affordable, underscoring the importance of tailored solutions that address the unique needs of the Pacific community. To further showcase this, in March, SSI will be rolling out additional protections, including insurance coverage against excess rainfall following the significant flooding Samoa recently faced in 2024, as well as drought and earthquake covers.

In partnership with UNCDF, SSI is helping local communities understand how insurance can protect them from climate change risks. Through community awareness and outreach activities, SSI aims to simplify insurance and build trust. However, the success of this initiative depends on the people of Samoa embracing this affordable safety net, the support of the region’s development partners and buy in from the Samoan government. Armed with such innovative tools, Samoan families, businesses, and communities can be better prepared for unexpected events and face climate challenges with greater security.