Oliver Wyman's Farooq Sheikh connects with Chris Sheehan, Co-Founder & CEO of WorldCover.
WorldCover is applying insurtech solutions to climate change—a challenging global problem. Using satellite data, on-ground sensing and innovative risk modeling, the company developed a climate and weather-linked insurance product. Today, WorldCover supports and protects farmers within developing countries, who are faced with some of the worst droughts in the world due to climate change.
“For 500 million people around the world, rainfall is actually their number one problem,” says Chris Sheehan, Co-Founder and CEO, WorldCover. “When it doesn’t rain, they don’t get crops, so they can’t get or payback loans. Farmers lose more than just their income—they lose the ability to pay school fees for their children and to feed their families.”
Within the emerging markets sector, WorldCover also creates institutional investment opportunities for a previously uninsurable risk. So how does this innovative business model work? Chris says that insurance policies are funded by external investors through a marketplace. This provides affordable crop insurance to farmers—and allows investors to add diversified returns and social impact to portfolios.
“It’s about using insurance to get rid of risk for these farmers and unlock opportunities for them,” Chris says. He says that research found that for farmers who received insurance (rather than cash grants) borrowed and invested more in their farms.
As a for-profit Public Benefit Corporation headquartered in New York City, the company is backed by global venture capital investors and Y Combinator, and in 2019, WorldCover raised a $6 million dollars Series A round led by MS&AD Ventures. In May, WorldCover also announced a new partnership with Nephila Capital, who now provides reinsurance capital through its Lloyd syndicate. With a focus on creating portfolios dedicated to natural catastrophe and weather risk exposures, the partnership with the world's largest insurance-linked securities (ILS) fund manager makes sense and strongly positions WorldCover for growth.
The company has significant traction in Ghana (enabling insurance in thousands of communities) and is looking to grow into additional Asian and Latin American markets. According to WorldCover, Ghana has a GDP of close to $50 billion and gets a significant contribution from agriculture, with more than half its 25 million population involved in farming.
As scientists continue to reinforce the severity of climate change, the potential disruption and financial implications have come to the forefront. Due to climate change many regions are experiencing higher air temperatures, drier air, and more severe or frequent droughts. Currently, WorldCover’s insurance product pays farmers when there is a drought. Chris says the platform uses satellite data and remote sensor technology to monitor rainfall, price risk and trigger claims quickly.
WorldCover’s algorithms are calibrated to monitor rainfall events by region and crop type. The company also designed an USSD Application to bridge the technology gap of non-tech enabled farmers. Using just a flip phone, farmers can access and pay for their crop insurance policies. When a drought situation is detected, customers are notified via an SMS or voice message alert. Funds can then be efficiently sent to a mobile money services, such as such as M-Pesa, for cash or relief.
As for what’s next for the insurtech. With operations also in Ughanda and Kenya, Chris says that WorldCover is looking to scale its geographical reach and insurance offerings to more emerging market countries and provide insurance protection against other risks, such as coverage for tropical storms and cyclones.
Ultimately, WorldCover is solving an unmet insurance need. As climate change intensifies the issues facing farmers and their families, WorldCover is working with them to build a better future.