LONDON, March 6 (Thomson Reuters Foundation) - More
developing countries urgently need insurance to cushion their
farmers against weather extremes that can worsen poverty, but it
is no magic bullet to ward off the escalating impacts of climate
change, experts say.
The burning question of how to stop drought becoming a major
crisis - especially in Africa - has caused many to eye insurance
as a possible answer.
"People think sometimes that insurance is the solution for
everything. It is not correct," said Mohamed Beavogui, director
general of the African Risk Capacity, an African Union agency
that helps states plan for natural disasters and climate change,
and provides them with insurance through its company, ARC
"Insurance is ... (for) when you have done everything you
can and there is still a risk you cannot cover," said Beavogui.
Planning for those risks - such as the number of people a
government would be unable to help in a crisis - is vital, he
told the Thomson Reuters Foundation.
As climate change bites harder, bringing with it worse
droughts and floods, demands on donors' purse strings are likely
to grow, and experts say development gains - especially in
Africa - are at risk of being rolled back.
Last year, southern African states appealed for $2.9 billion
in aid when the region was hit with its worst drought in 35
years, affecting 39 million people. Now, drought in the
continent's east is pushing millions into hunger.
Insurance can be triggered more quickly than international
aid, which can take months to fund. ARC's cover is based on a
pre-agreed plan for how the government will use the payout.
Since ARC Ltd began issuing policies in 2014, eight nations
have taken out insurance and four - Senegal, Mauritania, Niger
and Malawi - have received payouts totalling $34 million.
The index-based insurance offers maximum coverage of $30
million per country per season for drought events that occur
with a frequency of one in five years or less.
But while drought last year left 6.5 million people in
Malawi in need of food aid, Malawi did not receive an ARC payout
Malawi took out insurance based on a crop - long-cycle maize
- that, as it turned out, most farmers did not grow in the
2015/2016 season. Long-cycle maize survived the drought, while
the short-cycle maize most farmers grew did not.
In the end, ARC's member states agreed to an $8.1 million
payout for Malawi - the amount it would have received had the
government requested short-cycle maize as the base.
"It means that we shouldn't rely only on data the government
gives us," Beavogui said. ARC will now also check what farmers
are growing with research centres and extension services, among
others, he added.
JURY STILL OUT
Insurance companies that pay out directly to farmers are
still few and far between in many developing countries, and they
offer limited services.
Where they do exist, they mainly serve commercial farmers
because the poorest cannot afford to pay premiums without help
from a donor or government, said Andrew Shepherd, director of
the Chronic Poverty Advisory Network, based at the Overseas
Development Institute, a London-based thinktank.
"The jury is still out" on whether insurance can make the
poorest farmers more resilient to drought, but it can play an
important role in preventing wealthier farmers from becoming
impoverished, he said.
"All the focus by governments, and often donors, is on
getting people out of poverty, and not on preventing people from
falling into poverty," he said.
India is one of the few developing countries with a national
insurance scheme for farmers, including those with as little as
one cow or buffalo, which works through local agents, said
Senegal has two kinds of insurance - macro-insurance through
ARC, and micro-insurance - both of which paid out when bad
drought hit in 2014.
The Compagnie Nationale d'Assurance Agricole du Senegal
(CNAAS) - set up by the government, insurance companies and
international agencies - targets most farmers in rain-fed crop
areas with index-based insurance products.
In 2014, Senegal's ARC payout reached people and livestock
with aid, getting help to herders within three months, said
Mathieu Dubreuil, micro-insurance advisor at the World Food
"It was a good match" between ARC which pays out in a crisis
and micro-insurance schemes that pay out more often, he said.
WFP, which offers small-scale insurance for farmers, is also
exploring taking out ARC insurance, which would give an
additional payout to countries, disbursed either by WFP or
through the government.
VICIOUS CYCLE OF HUNGER
In Malawi, farmers are waiting for the April maize harvest
to bring an end to months of food shortages.
"If we are not careful, we will have a vicious cycle of
hunger," said Wycliffe Kumwenda of the National Smallholder
Farmers' Association of Malawi, representing more than 100,000
Uninsured farmers are condemned to queue up for food aid -
time taken away from cultivating their fields - while hunger
saps their energy, he said.
There is some insurance for Malawian tobacco farmers, but
many do not know about it. Premiums are a problem too, as is the
ability to make a claim, Kumwenda said.
"We need to install proper instruments that can capture
weather parameters like rainfall (and) temperature," he said.
"Most of the met stations are not reliable."
That makes claims hard to justify, putting off potential
insurance providers, he added.
As climate impacts are expected to worsen in the coming
years, potentially pushing up the cost of premiums, ARC is
developing an Extreme Climate Facility (XCF) which will give
countries access to finance for climate change adaptation.
"You have to insure what you cannot cover, and at the same
time you have to prepare and adapt," said Beavogui. "My real
fear is we don't do it quickly enough."
(Reporting by Alex Whiting @Alexwhi; editing by Megan Rowling;
Please credit the Thomson Reuters Foundation, the charitable arm
of Thomson Reuters, that covers humanitarian news, climate
change, resilience, women's rights, trafficking and property
rights. Visit news.trust.org/climate)