Weather Index Insurance in Sub-Saharan Africa

Abstract

Food insecurity is a leading cause of poverty in sub-Saharan Africa. Overcoming food insecurity would improve the health and education of rural populations, increase labour productivity and promote rural economic development. Governments and numerous aid agencies dispense food aid during famines. The recent emergence of weather index insurance offers a promising new risk management tool that enhances economic opportunities and welfare in rural sub-Saharan Africa. In 2004 MicroEnsure launched Africa’s first weather index-based insurance product.1 In 2008 the International Fund for Agricultural Development (IFAD) and the World Food Programme (WFP) established the Weather Risk Management Facility (WRMF), which supported pilot projects for weather index insurance. In 2009 Kenya Seed, the Syngenta Foundation, UAP Group, Swiss Re and the World Bank’s Global Index Insurance Facility (GIIF) joined forces to establish Kilimo Salama, which offered index-based microinsurance to Kenyan maize and wheat farmers, with more crops and livestock being added later. In 2011 WFP and Oxfam America founded the R4 Rural Resilience Initiative, building on the Horn of Africa Risk Transfer for Adaptation (HARITA). In 2013 the AXA Group launched index-based agricultural insurance; in 2014 AXA and the South African Sanlam participated in MicroEnsure; and in 2015 AXA entered into partnership with the World Bank’s GIIF. In 2014 Kilimo Salama was succeeded by the Agriculture and Climate Risk Enterprise (ACRE), which assists local insurers in Kenya, Tanzania and Rwanda. After a decade of keen experimentation, the focus has now shifted from pilot projects to scaling up index-based insurance as a risk management tool for smallholder farmers.