The Potential for Scale and Sustainability in Weather Index Insurance

More documents

Recommendations

Info

THE POTENTIAL FOR SCALE AND SUSTAINABILITY IN WEATHER INDEX INSURANCE FOR AGRICULTURE AND RURAL LIVELIHOODS evaporation and soil temperature every three hours from 06.00 to 18.00. The remaining 430 weather stations are mainly Class 3 stations: they collect data on rainfall and temperature only. There have been a few trials with other types of automatic weather stations, but these have not yet been scaled up, let alone mainstreamed. Other weather stations that are not part of the NMA network are also available, since NMA is not the only governmental agency managing weather stations. However, there is no comprehensive overview of all the stations in terms of number, models and quality. NMA records are open to the public. However, according to the agency’s data policy, users do not have the right to give meteorological data to a third party. All routine and daily weather forecasts may be requested by telephone. Data quality is also a concern. Most weather station records have major gaps, sometimes exceeding several months. Insurance premiums need to take into account the uncertainty that missing data create – and for stations missing 20 per cent or more data from the last 30 years, the necessary adjustment to premiums would be cost-prohibitive. Given this criterion, only about 64 stations can be used to develop weather insurance products. The HARITA pilot worked on ways to overcome limited weather data for the region. As mentioned previously, IRI has led the exploration of new techniques to enhance sparse local datasets through a combination of satellite data, rainfall simulators and statistical tools for incorporating information from stations nearby. Satellite data will also be used to better understand the correlation between rain gauges and losses on specific farms. Another initiative seeks to purchase 20 Class 1 weather stations for pastoralist areas, either to replace outdated models or introduce all new ones. These new, low-cost high-quality stations will replace old or malfunctioning ones (or they will be installed in pastoralist areas, since one of the aims is to improve the early warning system for these areas, which have been neglected). The Ethiopian Insurance Company is also keen to expand the network of weather stations in the country and has already held talks with the World Bank to this end. Regulation A general, internationally-recognized regulation for index insurance products does not exist in Ethiopia. Nevertheless, index insurance is growing. However, continuing such product development without appropriate regulation would be a risk for its future scalability and sustainability. Consumers should be informed of the products and of how they can reduce their risks. Building the weather risk-management product without regulatory support would develop either risk of product incomprehension or reduced product appreciation. Appropriate support and commitment, enhanced by the regulator, will encourage the partnership of high-level counterparts in this sphere, hopefully leading to an official riskmanagement environment, as well as to market growth. 30 30 United Nations. 2007. Developing index-based insurance for agriculture in developing countries, by E. Bryla and J. Syroka. Sustainable Development Innovation Briefs No. 2, March. New York: Policy Integration and Analysis Branch, Division for Sustainable Development, Department of Economic and Social Affairs, www.un.org/esa/sustdev/publications/innovationbriefs/no2.pdf. ANNEX 93
94 Assessment CASE STUDY 3 INDEX INSURANCE IN ETHIOPIA – THREE PILOTS As a result of the pilots, there is now increasing awareness among both farmers and financial institutions of the role of index insurance. This has had a number of positive effects, including opening access for smallholders to loans (as farmers are using credit to finance premium payments) and connecting agricultural insurance in Ethiopia to international financial markets. Strong local stakeholders and delivery channels A local insurance champion is essential to the scalability and sustainability of an index insurance product. Experience in pilots has led WFP to conclude that sustainability and scalability will not be achieved unless product development is locally owned and managed. In each of the three pilot programmes detailed here, one of the main pioneers has been the local company NISCO. The Ethiopian Insurance Company has realized that one key to scaling up and sustaining index insurance is to focus on intermediaries and unions in the development and roll-out of the product, especially since the existing national insurance association is not considered particularly active (members are often too competitive to work together effectively). To this end, the company has already initiated discussions with farmers’ associations. Client education Farmers will only be interested in something that is objective, timely and shown to have real benefits. According to the managing director of NISCO, the biggest obstacle to achieving scale is the low level of awareness of insurance and education among smallholders. During the dry season, says the director, farmers are only interested in price, and during the wet season, they are busy tending their crops. One option is to bring farmers together and pay them a per diem to learn about index-based insurance. NISCO has its own agronomists and it trains extension agents and farmers. It realized early on that it was important to train these extension agents in insurance, as farmers trust them. Farmers receive training and certificates, so they are aware that they have insurance. It is important to choose farmers with a good credit history and who use good inputs and practices. NISCO checks all model farms at crop emergence to confirm that crops have been planted, and the policy only becomes effective at that point. The haricot bean pilot involved ongoing communication with farmer cooperatives. They were considered a good starting point for reaching farmers directly and, more importantly, for communicating with them clearly and effectively, without misunderstandings.
Page 1 and 2:
The Potential for Scale and Sustain
Page 3 and 4:
© International Fund for Agricultu
Page 5 and 6:
4 CONCLUSION 59 REFERENCES AND RESO
Page 7 and 8:
6 Acronyms AIC Agriculture Insuranc
Page 9 and 10:
THE POTENTIAL FOR SCALE AND SUSTAIN
Page 11:
Page 14 and 15:
14 CHAPTER 1 RISK IN AGRICULTURE se
Page 16 and 17:
16 CHAPTER 1 RISK IN AGRICULTURE Tr
Page 18:
18 CHAPTER 1 RISK IN AGRICULTURE Go
Page 21 and 22:
22 CHAPTER 2 WEATHER INDEX-BASED IN
Page 23 and 24:
Page 25 and 26:
Page 27 and 28:
Page 29 and 30:
Page 32 and 33:
Page 34 and 35:
Page 36 and 37:
Page 38 and 39:
Page 40 and 41:
Page 42 and 43: THE POTENTIAL FOR SCALE AND SUSTAIN
Page 56: THE POTENTIAL FOR SCALE AND SUSTAIN
Page 59 and 60: 60 References and resources Arce, C
Page 61 and 62: 62 REFERENCES AND RESOURCES McCarth
Page 75 and 76: 76 CASE STUDY 2 PEPSICO CONTRACT FA
Page 97 and 98: 98 Figure 4: Changfeng and Huaiyuan
Page 99 and 100: 100 CASE STUDY 4 INDEX INSURANCE IN
Page 101 and 102: 102 CASE STUDY 4 INDEX INSURANCE IN
Page 121 and 122: 122 Figure 7: Ontario, Canada CASE
Page 123 and 124: 124 Table 15: Forage Rainfall Plan:
Page 125 and 126: 126 Assessment CASE STUDY 6 FORAGE
Page 137 and 138: 138 Figure 9: Khersons Oblast, 57 U
Page 139 and 140: 140 CASE STUDY 8 INDEX INSURANCE PI
Page 141 and 142: 142 CASE STUDY 8 INDEX INSURANCE PI
Page 144 and 145:
Page 146 and 147:
Page 148 and 149:
Page 150 and 151:
Page 152 and 153:
Contacts IFAD Francesco Rispoli f.r
show all

The Potential for Scale and Sustainability in Weather Index Insurance

Create successful ePaper yourself

Delete template?

Save as template?