Weather insurance offers protection for poor farmers, stresses new UN report

3 June 2010

A new study by two United Nations agencies has highlighted weather insurance as an important tool to protect poor farmers, emphasizing that issuing such insurance before the planting season can be more effective than providing emergency aid after a calamity has wiped out crops.

“Weather insurance can reduce the need for costly emergency operations by preparing for the disaster, rather than reacting to the aftermath,” said Carlo Scaramella, Climate Change and Disaster Risk Reduction Coordinator for the World Food Programme (WFP).

“Not only can it help poor rural households reduce their risk in the face of weather shocks, it can also unlock other opportunities, such as access to credit, helping people invest in a better future,” she added.

The study, released by WFP and the International Fund for Agricultural Development (IFAD) at the Global Risk Forum in Davos, identified key principles to help promote the wider use of weather index-based insurance, and outlined how donors and governments can support the effort.

Weather index-based insurance, according to a news release issued by the two agencies, sets out an objective parameter, such as the level of rainfall, at a specific location, during an agreed period.

The terms of the contract correlate as closely as possible with the loss of agricultural production suffered by the farmer. All policyholders within the same area receive payouts based on rainfall measurements at the weather station close to their farms, eliminating the need for expensive, time-consuming loss assessments in the field.

“Weather insurance is mutually beneficial as it supports small farmers to better address risk in their agricultural activities, and encourages additional private-sector investment in rural areas, something IFAD believes can further support small farmers and their communities,” said the agency’s Associate Vice-President Kevin Cleaver.

The study released today was conducted by the IFAD-WFP Weather Risk Management Facility, and supported by the Bill & Melinda Gates Foundation.

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