Southeast Asia’s first sovereign anticipatory drought insurance mechanism links early warning to early financing.
VIENTIANE, Lao PDR | May 27, 2026 – The SEADRIF Insurance Company and the Food and Agriculture Organization of the United Nations (FAO) have launched an anticipatory drought insurance pilot in Lao People’s Democratic Republic (Lao PDR), marking the first time a Southeast Asian government has secured pre-arranged financing specifically designed to act ahead of drought impacts.
The pilot provides the Ministry of Finance of Lao PDR with access to payouts triggered by early warning data signaling elevated drought risk, before drought severely affects farming households and rural communities.
Financing is activated when the Combined Drought Index, monitored by the Department of Meteorology and Hydrology and combining observation and forecast data, crosses a defined threshold.
Drought is the single largest disaster risk in Lao PDR, with approximately 1.2 million people exposed annually and average annual losses estimated at US$672 million, around 3.5% of GDP.
With forecasts pointing to a possible return of El Niño conditions in 2026-27, the need for drought anticipatory action has become more urgent than ever. Scientific evidence shows that El Niño significantly increases the likelihood of below-average rainfall and drought across mainland Southeast Asia, including Lao PDR.
By linking early warning systems with pre-arranged financing, this pilot enables the Government to act before drought impacts intensify, helping protect agriculture, water resources, and rural livelihoods in the moment action matters most.
Under the pilot, payouts fund government-led anticipatory actions, including:
- Early warning messages via loudspeakers. Community leaders such as deputy village heads and volunteers receive training co-led by the Department of Meteorology and Hydrology and Lao National Radio for this process.
- Training on drought-resistant cropping techniques and water and irrigation management supported by the National Agriculture and Forestry Research Institute.
"Anticipatory action aims to reduce harm before drought becomes a full-scale crisis for communities,” said Benedikt Signer, CEO of the SEADRIF Insurance Company. "This pilot tests how anticipatory insurance can help governments act earlier, providing pre-arranged financing at the moment it can make the greatest difference. The lessons from Lao PDR will inform SEADRIF’s regional approach to drought risk financing.”
Deliberately structured as a limited-size sandbox, the pilot’s primary purpose is to validate the institutional mechanisms required for anticipatory financing such as inter-ministerial coordination, the claims and payout process, and funds-flow systems within government.
Payouts will be used in line with standard operating procedures co-developed by FAO with the Ministry of Finance, Ministry of Agriculture and Environment, Ministry of Labour and Social Welfare, and the Department of Meteorology and Hydrology.
“This pilot provides a pathway to strengthen Lao PDR’s preparedness for drought and the protection of rural communities,” said Thevarack Phonekeo, Deputy Director-General, Department of Planning and Cooperation, Ministry of Agriculture and Environment, Lao PDR. “Through this partnership with SEADRIF and FAO, we are working to ensure earlier and more predictable support for people affected by climate-related risks.”
The policy is structured as a drought extension to Lao PDR's SEADRIF multi-peril parametric sovereign insurance policy, launched in 2025, which delivered a US$2 million payout in September 2025 following cumulative impacts from Tropical Cyclones Wutip and Wipha.
“Rural communities are on the front line of climate change, with drought increasingly affecting agriculture and food security,” said Kyung-Mee Kim, FAO Representative to Lao PDR. “This pilot is an important step toward ensuring support reaches communities earlier, when action can still reduce losses and protect livelihoods.”
A connected feasibility study under the same GCF Readiness project will assess what a scaled parametric anticipatory drought insurance product would require — refined triggers, actuarial pricing, payout channels linked to social protection, and engagement with commercial reinsurers.
As the first sovereign anticipatory drought insurance instrument in Southeast Asia, the pilot advances SEADRIF's broader approach to strengthening agricultural risk financing across the region. This complements the Regional Agricultural Insurance and Sustainable Economies (RAISE) facility which is building agriculture insurance infrastructure to scale fit-for-purpose agriculture markets across ASEAN.
About FAO
The Food and Agriculture Organization (FAO) is a specialized agency of the United Nations that leads international efforts to defeat hunger.
FAO’s goal is to achieve food security for all and make sure that people have regular access to enough high-quality food to lead active, healthy lives. With 194 members - 193 countries and the European Union, FAO works in over 130 countries worldwide.
FAO Contact Details:
FAO in Lao People’s Democratic Republic
Email: FAO-LA@fao.org
About SEADRIF: Taking the Crisis Out of Disasters
SEADRIF is a regional platform established and owned by ASEAN+3 countries to strengthen disaster and climate resilience through pre-arranged financial protection and advisory support. It provides access to rapid and predictable funding when shocks occur, enabling governments to better manage disaster-related costs.
Through its regulated insurance company set up in Singapore, SEADRIF blends public and private capital to expand access to new forms of development insurance. Working closely with member countries, it co-designs solutions that are fit for purpose and scales them across sectors, geographies, and perils—helping protect people, economies, and futures across Southeast Asia.
Follow SEADRIF on LinkedIn. For inquiries, please email: contact@seadrifinsurance.com