Gesner Oliveira, a researcher at FGV IISR, presented a parametric insurance project focused on climate extremes during the event “From Potential to Impact: Implementation of the IDB’s Support Strategy for Brazil”, held on April 3 at FGV in São Paulo. The event brought together researchers and representatives from the Inter-American Development Bank (IDB), as well as civil society organizations, with the aim of discussing the Country Strategy for Brazil, which will guide the Bank’s actions through 2027. The document is structured around three pillars and seeks to foster sustainable economic development.
On the panel dedicated to detailing Pillar 2 of the IDB Strategy—which focuses on accelerating growth through strong institutions and higher productivity—Gesner Oliveira introduced a strategy for municipalities to adapt to and mitigate climate extremes. The project emerged in response to projections of increasingly frequent droughts and floods driven by climate change, as well as the shortcomings in drainage and basic sanitation services.
The share of domestic wastewater reused in Brazil is very small: only 1.5 percent of this water is treated. By comparison, countries such as China and Australia reuse around 10 percent. According to the researcher, Brazil has the potential to reach similar levels of treated water reuse.
“The combination of environmental sanitation, parametric insurance, and securitization can offer very interesting solutions for municipalities, and our work seeks to explore this in order to facilitate municipal capacity‑building to obtain this type of product in the insurance market,” said Oliveira.
The research is being applied in the municipality of Ribeirão Preto, where rainfall and drought patterns during critical periods were analyzed to determine when indemnification would be triggered.
“For example, with a premium of around BRL 3.5 million, the municipality would receive BRL 100 million in compensation in the event of a prolonged drought, as predefined. With appropriate water‑reuse metrics, we could reduce this premium to BRL 2.5 million while maintaining the same level of indemnification,” the researcher explained, adding that the project is developing a manual demonstrating how to provide coverage with a lower premium for a given municipality.
Learn more about this project by clicking here.