Arya Collateral and Agriculture Insurance Company of India (AICIL) announced to execute a first of its kind parametric insurance cover to mitigate utilization risk for agricultural warehouses. Arya, in partnership with AICIL, has developed a weather-based parametric insurance product that will protect professional warehouse operators against utilization risk arising due to extreme weather conditions during the growth and harvest stages of the crop.
Arya was incorporated in 1982. In 2002 it entered into agribusiness with a core business of warehousing and collateral management and is now present across India’s 20 states. The company is a significant player in the post-harvest agriculture ecosystem. It is a prominent service provider to agriculture corporates and the FPO ecosystem, catering to their warehousing and post-harvest needs. Arya manages 2.7 million tons of commodities through its network of 1,500 warehouses with an AUM of Rs 55 billion.
Utilization risk deters professional warehousing operators from creating storage capacity for farmers at the farm gate. This invariably increases the cost of storage for farmers and other stakeholders. The arrangement will also help in mitigating the utilization risk of warehouses aggregated through Arya’s a2zgodaam.com.
The insurance pilot has been executed across three states and 28 districts by Arya. Under this, Arya’s designated warehouses are mapped to block-level gridded weather data of the Indian Meteorological Department to enable the insurance coverage. This helps protect professional warehouse operators from the financial downside of paying rent despite low utilization in case adverse weather leads to lower commodity arrivals.
Ritesh Raman, general manager, Arya, added, “The facility will give confidence to warehouse business partners of Arya to offer competitive rates to its clients. Further, it’s one of a kind solution started in India to avert the utilization risk to warehouse owners arising from adverse climate conditions. Based on the pilot learnings and experience, we fully intend to further fine-tune and scale up the program offering with AICIL in association with Gramcover which worked closely with us on the product contours and structuring.”
Arya offers end-to-end post-harvest commodity management and financing services for smallholder farmers, FPOs, and other stakeholders in remote agricultural markets, enabling them to avoid agri commodities’ distress.