Agriculture is a key economic sector in many countries around the world. In Sub Saharan Africa (SSA) for example, the sector contributes, on average, 15% to the GDP of the region. More importantly, agriculture’s contribution to GDP reaches as high as 50% in Chad and ranges from 20-40% in the most populated countries in the region such as Nigeria, DRC, and Ethiopia. The sector is also important for employment - more than half of the total labor force in SSA is engaged in agriculture on smallholder farms (less than 2 hectares in size) that constitute approximately 80% of all farms in the region.
These smallholder farms are for the most part rain-fed and heavily exposed to the impact of adverse weather patterns, which can be significant. In Kenya alone, the 1998-2000 drought was estimated to have had economic costs of US$2.8 billion. More dramatically, the post disaster needs assessment for the extended 2008-2011 drought estimated the total damage and losses to the Kenyan economy at a staggering US$12.1 billion.
In more developed economies, there are established markets for the transfer of such risks from individuals and institutions facing such risks to counterparties that are better able to diversify and manage them. However, in Africa and across much of the emerging world, insurance and reinsurance companies have done a suboptimal job of identifying, capturing and transferring these risks to market players who are best able to underwrite them.
WorldCover was founded to address the last-mile transfer of these kinds of risk by powering a climate risk marketplace initially targeted at the ag sector. In emerging markets (starting with SSA), WorldCover connects farmers (and ag parties exposed to climatic risks) with climate risk investors. Through its risk transfer platform, the company offers farmers protection against natural disasters and phenomena that negatively affect their crop yields, while giving risk investors the desired diversification of their risk portfolios and offering uncorrelated investment returns. For the farmers, insurance cover provided through WorldCover safeguards their livelihoods and, as studies have shown, gives farmers the confidence to further invest in their farms, unlocks access to credit and other services, and ultimately produces more income for them and their community.
While others are tackling the problem in a variety of ways, we are particularly excited about WorldCover’s approach using an ‘easily digestible’ and understandable product, distributed directly and through local partners, combined with simple and cost effective processes for claims and claims administration, all leveraging the Company’s proprietary technology. The platform is flexible yet robust and can be used all over the world for a wide variety of natural phenomenon that threaten agricultural yields such as drought, flood and typhoons.
Chris Sheehan is the type of Africa-focused entrepreneur we love to support. He has come at the problem with a distinct approach and, together with a highly experienced team, has developed the zero-cognitive-overload product and further demonstrated its fit with the needs of smallholder farmers in Uganda, Kenya and Ghana. These farmers have demonstrated trust in the company and signing up for, and repeatedly subscribing for, insurance cover over the last few planting seasons.
We are pleased to announce our investment in the Series A round for WorldCover, in conjunction with our co-investors, MS&D, YCombinator, Savannah Fund, Greylock, Index, Venrock & a host of high-quality angels. We look forward to working with Chris and the team to drive adoption of climate risk protection for agriculture in Africa specifically, and emerging markets in general.