Climate Adaptation Insurance Tool: Q&A with Rahel Diro

Climate Adaptation Insurance Tool: Q&A with Rahel Diro

This article was first published on the blog of the International Institute of Climate and Society here.

international 570 million Smallholder farmers are most vulnerable to current and future climate variability and climate change. They need supportive and science-based strategies to enable their communities to resist these impacts and enable them to have sustainable livelihoods regardless of what the climate may bring. Adapting agriculture to adapt to today’s climate, an adaptation strategy supported for tomorrow (Action today) Columbia World Project It is to increase the availability of affordable index-based insurance, which is an effective way to help farmers compensate for some of the economic losses caused by drought and other extreme weather that destroys crops.

The development of effective index-based insurance products requires good data, as well as input and feedback from the agricultural community (see video).For more than ten years, the International Institute of Climate and Society’s Financial Instruments Department Team Has been developing tools to help design, implement and support index insurance projects in more than a dozen countries around the world. The ACToday project accelerated this work by supporting the further improvement of these tools to better serve local farmers, and collaborating with the World Food Program (WFP) and the World Bank to significantly expand its insurance programs in Ethiopia, Senegal, and other countries . Africa.

We interviewed Rachel Diro, Senior staff assistants and ACToday insurance experts provide more detailed information on these latest developments.

Can you describe some of the tools you have developed with your partners and agricultural communities over the years, especially under ACTday?

Over the years, IRI has been working with the World Food Program and other major partners in Ethiopia to develop reliable methods to design and verify insurance indices based on weather/climate data (see sidebar). We understand that one of the challenges to overcome is the potential mismatch between the needs of farmers and the timing of payments triggered by the use of climate information. In other words, sometimes the index does not “see” the actual situation and does not trigger payment. Even if crops may be affected, farmers can benefit a lot from the payment. Over the years, we have done a lot of research on this issue. One thing we have learned is that the risks faced by farmers in some areas are more due to the agricultural suitability of the land than the accuracy of the index. We hope to avoid this situation and only provide index insurance for those areas that are meaningful and useful to farmers during periods of drought and other weather and climate-related risks.

Under ACToday, we have developed an online mapping and analysis platform to help the World Food Program, the World Bank and other partners use crop models and other data to easily assess the feasibility of planting specific crops in specific locations. This platform, or “map room” as we call it, can help experts visualize rainfall patterns in a large area. They use it to filter out areas deemed marginal by the insured crop and exclude these areas from the insurance plan. Now that such a tool exists, partners can customize it for any country/region where they support index insurance.

Rahel Diro had a focus group discussion with farmers in a village in Amhara, Ethiopia.

What role did farmers play in the development of the map room, and how did the tool evolve with the addition of more information?

All our research and experience in this field show that if we want to develop products that truly meet their needs, co-designing insurance with farmers is the key. First of all, we must understand the history of drought experienced by farmers. This is also the reason for our intensive practice. We ask farmers to tell us the drought years they remember in the past 30 to 40 years.

In the past, IRI would generate indexes and share drafts for expert review, but the new ACToday platform allows true collaborative design. This tool enables local partners to make their own design choices and understand the trade-offs between choosing different parameters. They have been able to design their own drought index. The main criterion is the extent to which the designed index captures the historical drought experience of farmers. This means looking back at the past and asking: “Can we use this data to predict droughts in the past?” If history is correct, then the tool is more likely to correctly predict the future. This is why one of the main indicators for evaluating the index is the degree to which the historical expenditure of the satellite-based index matches the historical drought experience of farmers.

How can comparisons between satellite observations and farmers’ reports help improve index insurance tools? What does fit or unfit look like?

This is imperfect information. We mainly work in rural areas where data is difficult to obtain. Background is the key. We rely on the local experience of agricultural extension agents. Farmers have their own prejudices, and they may not know the details. For example, they may remember that they had a food shortage 30 years ago, but they may not remember whether it was caused by pests, drought or floods. But for index insurance, we need to be specific. This is why ACToday also worked with government experts from the Ethiopian Ministry of Agriculture and Food Security Office to create a tool to help them review drought years reported by farmers and conduct data quality assessments. The output of this tool is then used as a comparative data set for assessing the accuracy of the drought index.

The graph shows the consistency between historical insurance expenditures from different satellite data sources and the drought years reported by farmers. The colors of the bars represent different data sources, and the height of the bars represents expenditures (in %) from these different data sources. The red dotted lines represent the years that farmers consider as “bad”, and the height of these dotted lines is related to the ranking (the worst years considered by farmers are the highest). When the payment bar is aligned with the red dotted line, for example in 2002 and 2015 (blue dotted rectangle), the match between the farmer and the satellite is good. A better understanding of the factors that lead to a “bad” year can help improve tools and generate more matches to better serve farmers when they need it most.

These efforts involve not only IRI and farmers, but also a team of individuals from the government, universities, and development agencies. Why is it important to have the support of all these different groups for the benefit of long-term sustainability?

Obtaining the support of stakeholders at all levels is essential. We want farmers to have these resources, such as index insurance, even after projects like ACToday are over. Ensuring that these tools meet demand and are useful to farmers, getting government officials to commit to including these plans in future climate plans, and persuading scholars to invest in continuous improvement of the data set will help ensure that these plans not only persist, but they Will continue to adapt as needs and climate change.

This map of Zambia shows where village surveys have been conducted.

Where does this research go next? How do you think the method might have to be adapted in the next country/region where this process is implemented?

In index insurance, there is always some margin of error, even if the error is small. A very good index may have an 85% match between drought and expenditure; another area may only have 67%, but for that market and the business model of farmers, this may be acceptable. However, design choices are made at the local level, so decisions about how to improve profitability can be made within these communities. This has a huge impact on the development of products that meet customer needs and the transfer of product ownership to local stakeholders. Both of these characteristics have important implications for the sustainability of these products.

The methods outlined here have been adopted by other countries. In Zambia, we are implementing a similar process for government-funded projects across the country. The opinions of farmers are solicited every seven villages, and the joint design is currently being implemented. We hope that we can continue to improve the process with local stakeholders.