Drought insurance Key to food security

As the country continues to face adverse effects of climate change that has negatively  affected  agriculture output, some farmers have come in the open to request for drought insurance which they say is crucial to their survival Business News has learnt.

This year Malawi experienced effects adverse weather conditions which included erratic rainfall,dry spells and prolonged rains later in the growing season a thing which threaten to reduce harvest.

Jolted into action by the unpredictability of the weather the Malawi Oilseed Sector Transformation (MOST) programme, funded by the UK’s Department for International Development (DFID) is working hand in hand with insurance companies and other stakeholders to have farmers insured.

Speaking in an interview on the side-lines of  a rural and inclusive insurance workshop in Lilongwe focusing on innovations in insurance for smallholder farmers and other low-income groups in Lilongwe, MOSt Marketing Manager, Access to Finance Joseph Saiti said drought insurance is something farmers must take part in since climate change is here to stay.

“We have been working with insurance companies on drought insurance and funeral insurance. Since the impact of funeral expenses insurance can be easily seen a lot of farmers are now appreciating that insurance is crucial. Last year the farmers themselves  demanded drought insurance because drought is more dangerous than too much rains,” said Saiti.

Saiti however said that there is need for aggressive marketing to raise  awareness on the importance of insurance.

Policy and Programme Officer at World Food Programme Daniela Cuellar also spoke highly of the need to have farmers insured saying it is a cushion to effects climate change.

According to Cuellar WFP is working with the Ministry of Finance and Economic Planning, specifically the Department of Poverty Reduction and Social Protection and  the Insurance Association of Malawi and the Reserve Bank in a project known as R4.

R4 Malawi focuses on national capacity and systems strengthening, thereby, contributing to the achievement of national objectives on social protection and resilience, as well as to the development of pro-poor financial markets.

She said,“R4 Malawi focuses on national capacity and systems strengthening, thereby, contributing to the achievement of national objectives on social protection and resilience, as well as to the development of pro-poor financial markets. As the initiative plans its scale up, a graduation and national handover strategy has been developed, supporting the integration of the approach in national social protection systems and financial markets.

According to Cuellar, WFP, in 2017, in the face of a challenging season, 10,327 farmers got insured, for a total sum insured of over USD 990,000.

“The value of the premium paid to the local insurer Nico was over USD 190,000. In this context, the insurance triggered a payout for the dry spells experienced at the beginning of the season valued at about USD 500,000,” she says.

A source from the  Insurance recently told Business News that the Association of Malawi is participating in a 4 R resilience project which is being championed by various stakeholders  to cushion farmers in Balaka, Blantyre and Zomba against effects of climate change.

The source said  that they are working with the WFP 4 R team and that as an association they are offering risk insurance pegged at 30 per cent.

He said. ”The 30 per cent risk is shared by eight insurance companies while 70 per cent is reinsured outside Malawi. This project is about cushioning farmers against effects of climate change and if  their crops get damaged then they can make a claim.”

One of the companies participating in the project is CIC Africa and its Chief Executive Officer Robert Murigi who also represents the insurance sector in meetings with 4 r officials told Business News recently  that  farmers are very excited with  the weather index policy project.

He said.”As CIC we are participating in a weather index policy in a consortium arranged by the Insurance Association of Malawi. Farmers are in Zomba, Balaka and Blantyre are the ones we are working with and they are very entusuiastic. This is the first time a project like this is happening in Malawi under the 4 R resilience,” said Murigih.

Risk Transfer R4 enables the poorest farmers to purchase agricultural insurance. R4 has been one of the most successful efforts to scale up weather index insurance , a financial product based on a rainfall index highly correlated to local yields. Payouts are triggered by pre-specified patterns of the index rather than actual yields, thus eliminating the need for in-field assessment. n