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Promoting smallholder climate resilience through index-based weather insurance

May 12, 2017

Index-based weather insurance can help smallholder farmers increase their resilience to changing weather patterns caused by climate change. CTA promotes index insurance as a cost-effective safety net to smallholders in Southern and Eastern Africa. This past May, CTA presented its work in the field at a high-level conference in Bonn, Germany.

Helping smallholder farmers adopt climate-smart agricultural and business practices is an important part of CTA's work programme. Working in African, Caribbean and Pacific countries, we promote technologies and approaches that can help smallholder farmers become more resilient to the effects of climate change. The aim is to provide achievable solutions which protect the livelihoods of farming families against future environmental uncertainty.

Index-based weather insurance is a cost-effective way of safeguarding against such uncertainty – protecting smallholder families against food insecurity and hunger and giving them the confidence to invest in and improve their farming enterprises.

What's in an index?

The most common forms of agricultural insurance have tended to pay out based on individual yield losses or damage and health costs to crops and livestock. For developing countries, with large numbers of small-scale farmers, measuring such individual losses would incur enormous costs for insurance companies. As a result, premiums tend to be very high – well out of the reach of most smallholders.

Index-based insurance offers an alternative in which individual assessment is not necessary. Instead, indemnities are based on an 'index' of values relating to weather variables known to impact on agricultural productivity. This index acts as a valuation proxy for insurers, sidesteps the need for individual assessments, and in so doing brings down insurance costs.

Although weather index-based insurance is not appropriate for compensating damage caused by other site-specific events such as hail or frost, it is very useful for protecting farmers against broader environmental scenarios such as the droughts and temperature differences brought about by climate change.

Insurance made for small farmers

CTA promotes index-based weather insurance through its flagship projects in Southern Africa and Eastern Africa. Here, farmers rely largely on rainfed agriculture. This means that communities are highly vulnerable to the effects of climate change, which causes recurrent swings between food scarcity and surplus for several millions of people.

To help address this fragility, CTA, working with local and international partners, aims to improve the climate resilience of 200,000 smallholder farm households in Southern Africa by promoting climate-smart agricultural solutions, primarily in Malawi, Zambia and Zimbabwe. In these countries, CTA aims to increase the uptake of index-based weather insurance by improving farmers' understanding of weather insurance and its benefits, registering them with insurance companies.

CTA also supports a regional approach for the development of weather insurance, and strengthens the capacity of farmers to use information and communication technologies to access weather information. In the project countries, CTA works with local partners to promote weather insurance as part of a 'bundle' of solutions; experience elsewhere has shown this approach to be more effective than one in which weather insurance is promoted as a single product.

New options to manage risk

Other work on index-based weather insurance has been taking place in Eastern Africa. In Uganda, for example, CTA launched an ICT project in March known as the Market-led, User-owned ICT4Ag-enabled Information Service (MUIIS) Bundle. This service bundle consists of a series of context-specific weather alerts, agronomic tips and index-based insurance information provided throughout the growing season. The service covers four agricultural commodities – maize, beans, sesame and soybeans – and enables Ugandan farmers to access satellite-based crop advice at the swipe of a screen.

CTA is also building the capacity of small-scale farmers in a wider flagship project in Eastern Africa. This initiative, which covers Uganda, Kenya and Ethiopia, aims to increase the climate resilience of livestock farmers in the region by creating equitable market opportunities and improving access to new ways of managing risk, including index-based weather insurance.

Besides working directly with partner countries, CTA is also collaborating with development organisations and the private sector in sharing lessons and opportunities to scale up index-based weather insurance for smallholder farmers.

In Bonn, CTA's Director Michael Hailu and Senior Programme Coordinator Oluyede Ajayi spoke at a session on connecting insurance with farmers' needs, part of the conference on insurance organised by the CGIAR Research Program on Climate Change, Agriculture and Food Security (CCAFS) in collaboration with CTA and the Syngenta Foundation for Sustainable Agriculture (SFSA).

CTA also co-organised a conference on ‘Scaling-up agricultural adaptation through insurance: Bringing together insurance, big data and agricultural innovation’ in collaboration with CGIAR Programme on Climate Change and Food Security (CCAFS), Syngenta Foundation of Sustainable Agriculture, and the German KfW development bank. This took place on 14 May as part of the ongoing Subsidiary Body for Scientific and Technological Advice (SBSTA) of the United Nations Framework Convention on Climate Change. During the Conference, CTA will lead a parallel session on "Connecting agricultural insurance to meet farmers' needs – success stories and lessons". CTA's Director Michael Hailu and Senior Programme Coordinator Oluyede Ajayi spoke at various sessions during the conference

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