Microinsurance to mitigate climate change impact
Lloyd's News Centre, 4 June 2010
An insurance scheme that brings together climate change risk mitigation and crop insurance for poor farmers is about to begin a second trial in four communities in Northern Ethiopia with the intention of a regional roll out in 2011.
Underwritten by a local insurance company and reinsured by Swiss Re, the Horn of Africa Risk Mitigation Project uses a rainfall index to trigger compensation for farmers growing the Ethiopian staple grain crop of teff in case of drought. It is unique, however, in that the farmers can pay their premiums through labour on projects that will mitigate the effect of climate change in their area, such as tree planting.
To turn the labour into monetary value, the scheme uses a national government cash-for-work programme, which enables it to reach the most vulnerable farmers. About 60 percent of farmers paid their total premiums in this way, according to David Satterthwaite, senior global microinsurance officer for Oxfam America, one of the partners in the consortium that structured and organised the scheme. He explains, "lack of cash is the main reason that people don’t participate in insurance schemes. Using this government national cash for work programme is a way to address this issue and to scale up the size of the programme."
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