The vulnerability of the Caribbean region’s agriculture sector to weather shocks is acute and is therefore in need of greater financial and fiscal safeguards. In light of this, this study proposes the development of an innovative, meso-level parametric weather-related insurance framework, leveraging blockchain technology, to protect smallholder farmers in St Vincent and the Grenadines (SVG), Belize, and other participating Caribbean countries against the dual threats of excess rain (flooding) and deficit rain (drought).

The proposed system is based on two distinct, policy-centred, easily calibrated parametric triggers. The excess rain-driven policy measures are activated by a dual trigger: i) the occurrence of a hurricane affecting the country; and ii) rainfall exceeding the upper limit of the 95% confidence interval. Conversely, the deficit rain-driven policy measures are triggered upon: i) the official declaration of an El Ni?o or similar event; and ii) rainfall falling below the lower limit of the same confidence interval. This architecture eliminates the need for individual damage and loss assessments, a key limitation of past indemnity-based schemes. Data analysis for Belize and SVG confirms the financial viability of the aforementioned triggers, with estimated payouts over a 20-year period demonstrating an explicit need for such coverage.

To address the challenge of covariate risk, where a single event triggers claims for all policyholders simultaneously, the framework incorporates a robust risk transfer mechanism. The primary meso-level insurer (e.g. Caribbean Catastrophe Risk Insurance (CCRIF)), which aggregates risk from thousands of farmers, can secure reinsurance, perhaps through the issuance of a catastrophe bond directly on the blockchain. This catastrophe bond, issued by a Special Purpose Vehicle (SPV), is programmed with the same parametric triggers as the primary insurance policies. Bondholder funds, held in a stablecoin-collateralised pool, are automatically transferred to the insurer the moment the oracle system verifies a triggering event. This integration creates a seamless, end-to-end risk transfer mechanism from the farmer to global capital markets.