Weather risks have a tremendous impact on the livelihoods of Smallholders farmers in sub-Saharan Africa. Weather based Index-based insurance is an attractive approach to managing weather and climate risk. It uses a weather index, such as rainfall, to determine pay-outs. Serves as an innovative form of social safety net and addresses poverty dynamics in areas that are vulnerable to risk. Additional advantages of Weather-based Index Insurances (WII) are:
Farmers within the defined area have the same insurance pay-out conditions, regardless of their specific risk exposure.
Allow the policyholder direct access to the information on which the pay-outs will be calculated (transparency), and
Low operational and transaction costs as Index insurance requires limited individual underwriting (client assessment).
WII, a fairly new phenomenon particularly for the African continent, is currently being widely piloted in many African countries, including Kenya, Malawi, Mozambique, Swaziland, Uganda and Zambia. This phenomenon is a risk mitigation measure that Africa needs to urgently scale up but this can only happen if it is well documented, with the knowledge shared and a conducive policy environment promoted for its out-scaling. The International Fund for Agricultural Development (IFAD) in partnership with World Food Programme (WFP) published technical guidelines for WII in agriculture development (2011). However, implementation in countries has followed different formats under various arrangements that are either solely private-to-private; or take the form of public -private partnerships (PPPs).
In partnership with COMESA, under the COMESA-EAC-SADC Tripartite climate change programme, FANRPAN seeks to:
Support agencies promoting weather based insurance schemes for smallholder farmers
Through this project FANRPAN hopes to provide a detailed picture of the climate financing landscape, particularly on:
WHO - lead and support agencies and service providers;
WHAT - type of implementation arrangements they are pursuing and for what commodities;
- WHERE - geographic location and agro-ecological zones;
- Monitoring and evaluation systems in place;
- Constraints and emerging opportunities for implementing weather based index insurance;
- Emerging lessons learnt from the various WII pilots; and
- Scalability of the WII in terms of increased geographical coverage (out-scaling region-wide) and policy influence (upscaling).
Weather based Insurance Index stories
Making Index Insurance Work for the Poor