Insurance for Ethiopian farmers

American farmers are relatively well protected if their crops fail as many have insurance. But in the under developed world such insurance is non-existent, instead when crops fail people starve unless aid is brought in.

Today's Boston Globe profiles a new insurance program that is being started in Ethiopia by Oxfam America. Writer James F. Smith explains how the new insurance program works.

Villagers have flocked to sign up for the trial farm insurance program since it was launched early this year. Funded by the Rockefeller Foundation and Swiss Re, one of the world’s largest insurance companies, Oxfam America has made drought insurance available for the first time to about 200 households, 38 percent of them headed by women.

The success of the pilot initiative prompted Oxfam America and Swiss Re to commit last month to sharply expand the project, from just one village to five more, with a new Rockefeller grant of $565,000.
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Marjorie Victor, who heads the program in the Boston Oxfam office, said two-thirds of the villagers opted to work for several days for the local drought-relief agency to pay for their policies; the rest paid cash. The farmers could pick a range of coverage, from just the cost of seeds and other inputs to comprehensive coverage of the value of the harvest. Most chose basic coverage for this season, which ends late this month.

In all, 200 farmers bought policies valued at a total of $2,500.

Oxfam America worked with a local firm, Nyala Insurance Co., to provide the policies, and Swiss Re then provided reinsurance. Because it would be too costly to try to measure each farmer’s actual losses, this is not crop insurance but weather-index insurance: If rainfall is below certain predetermined levels, then payments will be due to farmers.

Oxfam America’s president, Raymond C. Offenheiser, said the program can help achieve household food security in one of the poorest corners of the earth, with the potential to be applied far beyond Ethiopia’s borders. Swiss Re pioneered the weather risk insurance for poor countries, starting in India in 2004. The company says the program there now covers 350,000 farmers.

But nowhere are conditions as difficult as in the arid Horn of Africa.
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The government and foreign aid groups have forged a food safety net for nearly eight million chronically hungry people. But the lack of rains this year have pushed another 6.2 million into the ranks of those officially in need of food aid in a country of 77 million.