May 15 in Side Event "Weather Insurance in Ethiopia: Lessons Learned and Way Forward". Presented by Guush Berhane, IFPRI.

1. Discussion Points
Guush Berhane (IFPRI)

2. Index-based agricultural insurance offers
much potential
• Reduces the cost of assessing damage in spatially
dispersed fields – the index triggers!
• Reduces moral hazard: farmers cannot temper the
trigger – independently verifiable
• Addresses the challenge of risk covariance among
farmers by covering wider area and multiple activities
• Can reduce transaction costs by using risk aggregators
(e.g., farmers groups, MFIs, value-chains etc)

3. Too many pilots, too little scaling-up!
• New concept to farmers – initial investment can be
high
• Trust (unlike credit, insurance collects money!)
• Presence of informal insurance (not clear which way
to plays out)
• Heterogeneities among farmers: self-insurance (the
better off) vs. credit constraint (the poor)

4. Too many pilots, too little scaling-up!
• Basis risk – reduces real value to the insured
• Product design is complex (actuarial skills missing)
and requires extensive data (missing)
• Weak implementing stakeholder & available
infrastructure (e.g., Meteorology)
• Transferring risk internationally (linking to re-
insurance) can be a nightmare!

5. Discussion points
 How can affordable insurance to smallholders at
commercially viable and financially sustainable scale be
achieved?
 What are the key lessons learned?
 What are the challenges to scaling-up?
 What needs to be done?
Research?
Policy?