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Osgood Index Insurance
The document discusses the potential of index insurance to support smallholder farmers by alleviating risks associated with climate change and enhancing productivity. It highlights challenges faced by traditional insurance and explores innovative index-based solutions that offer affordable and efficient risk management. By leveraging experiences from various projects globally, the document aims to derive insights for scaling effective insurance models that are beneficial to farmers.
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Osgood Index Insurance
- 1. Learning how to make insurance that is popular with smallholder farmers: Insights from some projects that scale Daniel Osgood Lead, Financial Instruments Sector Team Columbia University IRI
- 2. The Issue • Index insurance hoped to meaningfully reduce poverty at large scales • Scaling, demand, impacts of many projects “disappoinDng” • Some projects have elements that do not “disappoint” • What can we learn from these projects? • How can we build insurance that is popular with farmers? (has value to farmer, can scale, posiDve impacts)
- 3. What is insurance for? • Climate change: more bad years • AdaptaDon: increase producDvity in normal years to cover bad year loss • But strategies that increase producDvity in most years face increased risk in bad years • Threat of 1 drought year out of 5 prevents other 4 from being much more producDve • Key to adaptaDon is to relax risk of bad year to unlock producDvity opDons • Insurance: help reduce risk to unlock producDvity
- 4. Why index insurance? • Insurance: reduce risk to unlock producDvity • But problems with tradiDonal insurance have made it tough to implement • Recent index innovaDon Insure weather index • • • • eg: provide payout if there is drought Cheap, “easy” to implement, good incenDves Many limitaDons-‐-‐oVen doesn’t pay when farmer faces loss Different families: Weather index, Area yield index • SDll in early years
- 5. Why so tough? • Insurance too expensive if it doesn’t unlock opportunity or if displaces more effecDve tool • What chances to take? • High yielding seed? TransplanDng? • Early season / Late season drought probability? • Basis risk not simple: does insurance help reduce risk enough to take these opportuniDes? • Must solve sophisDcated problems together to design and validate insurance
- 6. Why me (at IRI)? • InternaDonal Research InsDtute for Climate and Society • Enhance socieDes ability to understand and manage climate risk • IRI worked since ‘early days’ of index insurance • Solid science base, working with farmers, partners, processes, capacity building and training, policy • Connect the experiences from many project partners • ArgenDna, Bangladesh, Dominican Republic, Ethiopia, Ghana, Honduras, Indonesia, Kenya, Malawi, Mali, Nicaragua, Nigeria, Philippines, Rwanda, Senegal, Tanzania, Uganda, Uruguay • Experience with popular quickly scaling products • Tens of thousands of farmers individually chose to buy indexes • Significant posiDve impacts
- 7. Partners around the world
- 8. Connecting experiences in indexes 1. ወደ አዲስ ቀበሌ መነሻ ጉብኝት — Index Insurance Sample Educational Exercises 2.0.0 documentation 12/7/12 1:11 AM በውይይቱ መጨረሻ ሁሉነም ጥያቄዎችና ያልተዳሰሱ ጉዳዮች ያዳርሱ። በመቀጠልም ቡድኑ በኢንዴክስ ዝግጅት ሂደቱ መስማማት አለመስማማታቸውን እጅ በማውጣት እንዲገልጹ ያድርጉ። በመጨረሻም ከላይ በተመለከተው መሰረት በመግለጫ 4: “የኢንዴክስ መረጃ መሰብሰቢያ ቅጽ” ላይ መገልበጥ ያለባቸውን የጥያቄ መልሶች በቅጹ ላይ ይገልብጡ። CAPÍTULO 2 ተጨማሪ ሀሳብ ካካባቢው ህብረተሰብ ጋር አብሮ መስራት የሚያስችል ተጨማሪ ምክሮችና መመሪያዎችን ወደ አዲስ መንደር መነሻ ሀሳብ: ጉብኝትበሚከተሉት ክፍሎች ይመልከቱ፧ መግለጫ ቁጥር 5፡ካካባቢው ህብረተሰብ ጋር አብሮ በሚሰራበት ወቅት መደረግ የሚገባቸውና መደረግ የሌለባቸው አምስት ዋና ዋና ነጥቦች። መግለጫ ቁጥር 6፡ዝርዝር ማጣሪያ: ወደ አዲስ መንደር መነሻ ጉብኝት ከመደረጉ በፊት መዘጋጀት ያለባቸው ማስረጃዎች። s Riesgo climático y oportunidade 2. መግለጫ 2.1 Tema: Riesgo climático y opor tunidades 1፡ 2.1. መግለጫ 1፡ ከኢንዴክስ ዲዛይን ዝግጅት ቡድን አባላት ግለሰባዊ መረጃ መሰብስቢያ ጥያቄዎች 2.1.1 Objetivo una serie de ejemplos basados en compropósito guiar al usuario a través de Los siguientes ejercicios tienen como agricultor se puede enfrentar al tomar los tipos de alternativas a las que un una idea general de algunos paraciones costo-benefico que ilustran climáticos. El ejercicio también provee de los riesgos s decisiones con respecto a la gestión en base a índices. Los siguientes capítulo de riesgos climáticos y de seguros año hay de los principios básicos de la gestión documento suponemos que en cada introducidos. Para el propósito de este elaborarán los conceptos aquí solamente una temporada agrícola. ከዚህ በታች የተዘረዘሩት ጥያቄዎች የቀበሌው አባላት በሀብት/ንብረት፣ በውሃ አጠቃቀም፧ በገቢ ምንጭ እንዲሁም ድርቅን በመቋቋም አቅም ምን ያህል እንድሚለያዩ ለማወቅ ይረዳሉ። ሀብት/ንብረት፣ የውሃ አጠቃቀም፧ የገቢ ምንጮች እንዲሁም ድርቅን የመቋቋም 2.1.2 Introducción de tipo climático, los cuales hacen en desarrollo se ve limitada por riesgos La productividad agrícola en los países climáticos adversos como sequías o tes o semillas de alta calidad. Eventos vos, que los agricultores no utilicen fertilizan agricultores y destruyen activos producti dad alimentaria, endeudan a los inundaciones a menudo provocan inseguri a la gente hacia una situación de pobreza fenómenos son capaces de empujar a hace que la gente y como por ejemplo animales. Estos ”, la amenaza de la variabilidad climátic ente “buenos persistente. Pero incluso en años relativam a aumentar la productividad. Esto se o soliciten préstamos, que podrían ayudar las instituciones no hagan inversiones r totalmente una inversión. Como como un periodo de sequía, podría inutiliza años buenos. debe a que un evento climático adverso, aprovechar todos los beneficios de los res no pueden consecuencia, es frecuente que los agriculto que intentan reducir los impactos en gestión de riesgo climático son aquellas En el sentido más básico, las acciones Por ejemplo, los seguros pueden de vida. CHAPTER extremos en las vidas y los medios años del clima y de los eventos climáticos s, protegiéndolos de los riesgos de los los agricultores en los años normale THREE a índices son una herramienta ayudar a mejorar la productividad de en base el crecimiento económico. Los seguros A diferencia de los seguros peores, proveyendo así una base para de riesgo. res pueden utilizar para una mejor gestión relativamente nueva que los agriculto nes climáticas, como la caída en en base a las consecuencias de las condicio de cultivo tradicionales, los cuales pagan índice, tal como la cantidad de lluvia, en base a índices pagan en base a un rendimiento de un cultivo, los seguros el de satélite. Los seguros en base a índices meteorológicas locales o por medio que puede ser medida en estaciones de riesgos climáticos y en instrumentos más amplio de herramientas de gestión riesgos de pueden ser integrados en un conjunto para disminuir la vulnerabilidad a los 3.1 Topic: Climate específicamente como un paquete de medidas lo diseñados Risk and Opportunities de desarrol las personas. do los medios de vida y las vidas de tipo climático de los agricultores, mejoran CLIMATE RISK AND OPPORTUNITIES 3.1.1 Objective The following exercise is intended to guide the user through a series of trade a farmer may be faced with offs that illustrate the types when making decisions of choices that regarding weather risk manage a general overview of some ment. The exercise also of the basic principles of provides climate risk management chapters will elaborate on and index insurance. The the concepts introduced following here. 3.1.2 Introduction Agricultural productivity in developing countries is blocked by weather related fertilizer and high quality risks that prevent farmers seeds. Climate shocks from using like droughts and floods the destruction of product often lead to food insecuri ive assets, such as plow ty, debt and animals, which can push in relatively “good” years, people into persistent poverty the threat of climate shocks . But even makes people and instituti investments or to take out loans that could help to ons unable or unwilling increase productivity, because to make could render their investm a climate shock, such as ents worthless. As a result, a drought, farmers are often unable to reap the full benefits of In the most basic sense, good years. climate risk management efforts are those that try climate extremes can have to reduce the impacts that on lives and livelihoods. weather and For example, insurance in normal years by protecti can help enhance product ng them from the risks ivity for farmers of the worst years, providin Index insurance is a relativel g a foundation for econom y new tool that farmers ic growth. can use to help manage which pays out based on risk. Unlike traditional consequences of weather crop insurance, , such as farmer’s crop an index, such as rainfall, yields, index insurance which can be measured pays out based on at a local weather station integrated into a broader or by satellite. Index insuranc set of climate risk manage ment and development tools e can be decrease farmers’ vulnera specifically designed as bility to weather-related a package to risks, improving lives and livelihoods. 3.2 Checkpoint: Clim ate Risk and Opportuni Questions ties 1. You are a farmer and you decide to take out a loan to buy high quality have to repay your loan seeds. At the end of the with interest, which amount season you s to a payment of 120 units make 300 units of money of money. In a normal year with high quality seeds. In a bad year you make 60 you quality seeds. When you units of money when you use normal seeds instead use high of high quality seeds you and bad years. make less money in both normal (a) This growing season turns out to be normal. Will you be able to repay your loan at the end of the season? 5 3 አቅም የአንድን ቤተሰብ የሰብል ዋስትና ፍላጎት እና የሰብል ዋስትና የመግዛት አቅም አመላካች ናቸው። አወያዩ ከኢንዴክስ ዲዛይን አባላት ጋር ውይይት ከማድረጉ በፊት የቀበሌውን አስተዳዳሪ በማነጋገር ስለመንደሩ መሰረታዊ የሆኑ መረጃዎችን መሰብሰብ ይችላል። ይህም ስንት አባውራ በቀበሌው አንደሚኖር፧ ቀበሌው የሚታረሰው መሬት ስፋት፧ በመስኖ የለማው መሬት ስፋት፧ ዋና ዋና CHAPITRE 3 ሰብሎች፧ ቀበሌው የሚኖሩ የሴት እማውራዎች ቁጥር እና በድርቅ ምክንያት ስለሚክሰተው አደጋ የመሳሰሉትን ያጠቃልላል። የዲዛይን አባላቱ ለውይይቱ በቦታው እንደደረሱ ከዚህ በታች የተዘረዘሩት መረጃዎች ከያንዳንዳቸው መሰብሰብ ይኖርበታል። CHAPTER THREE 1. ሥም (በሚስጥር ይያዛል)፡ _______________________________________ e Qu’est-ce qu 2.APA_______________________________________ ፆታ፡ ITU ASURANSI IN DEKS IKLI basée sur un l’assurance rologique ? indice météo M? ፆታዎ ሴት ከሆነ የሴት እማውራ ነዎት? _______________________________________ 3.1 Topik: Ap a itu Asurans i Indeks Iklim? météoro3. እድሜ፡ _______________________________________ e sur un indice urance basé t-ce que l’ass 4. በቀበሌው የሚኖሩበት መንደር ሥም፡ _______________________________________ Thème : Qu’es 3.1 3.1.1 Tujuan Tujuan dari bab ini adalah untu k memperkenal indeks iklim berb logique ? kan pembaca deng eda dari produk an konsep Asu asuransi tanaman iklim mungkin ransi Indeks Iklim cocok untuk peng tradisional, dan (l’assu, bagaimana asur untuk menggam elolaan risiko peta météorologique ansi barkan bagaiman tif ni secara keseluru e sur un indice les cultures, a asuransi inde 3.1.1 Objec han. l’assurance basé tionnelle pour ks ur le concept de d’assurance tradi 3.1.2 Pendah entera au lecte autres produits au risque. uluan: Apa itu document prés e se distingue des rale du fermier Cette partie du Asuransi? t cette assuranc la gestion géné rà ), commen ielle peut s’adapte Asuransi adalah rance indicielle pengaturan keua t l’assurance indic ngan disebabkan oleh et décrire commen berbagai hal, term yang dimaksudkan untuk mem bukanlah hadiah berikan perlindun asuk kematian l’assurance ? , kecelakaan mob atau subsidi, tetap gan dari risiko. être n’imil, atau bahkan Risiko ini dapa menerima perli i cara di mana Qu’est-ce que e. Ce risque peut n’est ni ction : t untuk kerugian ndungan dalam seseorang dapa assurés du risqu tanaman. Asurans 3.1.2 Introdu tahu t membayar seju surance lebih dari juml n de protéger les i mlah kecil di tahu s de récolte. L’as ah yang diterima n yang buruk. Namun, dari wak ancier qui a l’intentio même les perte tu untuk membaya n ant les bonnes Kita. Untuk men arrangement finan les accidents de la route, ou quantités pend r keuntungan dari ke waktu jumlah yang dibayark yang baik dan dapatkan asuransi t, surance est un urs plus pour paie de petites an SELALU akan L’as perusahaan asur t la mor Dalam pertukara , kita harus men personne payera toujo e : ce qui inclu ansi n untuk pembaya yetujui dan men par lequel une Néanmoins, on une profite andatangani kont yang memegang resiko untuk porte quel risqu subvention, mais un moyen kompensasi jika ran, yang dilak vaises années. surance gagne ukan di awal dise rak dengan peru ketentuan kont e pendant les mau au ni une compagnie d’as pensatoir un cade e que la rak sahaan asuransi but yang buruk terja it un montant com pensatoires parc . di yang tidak terca tertentu (biasanya berhubungan “premium”, perusahaan asur nées et elle reço ansi memberik les montants com e tidak terjadi, Kita dengan kerugian kup dalam kont an n recevra avec rak, pembeli tidak surance. Une prim ) terjadi. Nam tidak akan men l’assurance qu’o un, jika sesuatu compagnie d’as bahwa ada istila dapatkan prem diberi uang. Sela risque. une compagnie i Kita kembali. contrat avec une h kesepakatan in itu, jika dise e d’assurance, pour protéger du er et signer un awal yang men Salah satu man et pour une prim s, dans les cas entukan jumlah faat dari pembelia pakati kerugian obligé de s’accord ie d’assurance, se passent. Mai kompensasi yang urance, on est n asuransi adal ance à la compagn du contrat (relatif aux pertes) En plus, s’il Kita terima. Pour obtenir l’ass ah d’av mnisé. 3.1.3 Asuran un paiement fixe s spécifiées uré n’est pas inde fice de d’assurance est si Tradisional si les condition l’assurance, l’ass mnisé. Un béné mnité garantie dibandingkan t pas couvert par uré n’est pas inde n recevra. fournit une inde passe qui n’es le contrat, l’ass dengan Asuran qu’o événement se Asuransi indeks spécifiée dans compensatoire si Indeks où un mauvais adalah alat yang n’est pas autant file:///Users/raheldiro/projects/redumat/docs/_build/default/html/Amharic.html Page 5 of 10 dictent le montant relatif baru yang yarkan berdasar s mais la perte éterminées qui y a des perte dapat digunaka kan indeks, sepe itions préd n petani untuk rti curah hujan, qu’il y a des cond konsekuensi dari membantu men diukur pada stasi l’assurance est cuaca, seperti ? gelola risiko. Itu un cuaca lokal hasil panen peta lesaikan sejumlah ance indicielle dibaatau ni. Perbedaan masalah mendasa parée à l’assur yang cerdik mem melalui satelit, bukan berdasar negara-negara L’assurance initionnelle com kan buat asuransi inde berkembang. Tida r yang membuat asuransi tradi gérer le risque. surance trad ks mampu men sional tidak bisa k seperti asuransi lapangan petani r les fermiers à 3.1.3 L’as yemesurée par une dijalankan di wila tanaman tradision untuk menentu eau qui peut aide saison, qui est kan premi atau yah pedesaan di yang telah ditet al, perusahaan ivement nouv débourse sur e pendant une menilai kerusaka asuransi tidak apkan sebelumn est un outil relat pluie qui tomb traditionnelle qui problèmes ielle ce tité de perlu mengunj n, jika jumlah ya, maka asuransi kelangsungan L’assurance indic paré à l’assuran ungi ieurs comme la quan curah hujan di hidup tanaman akan membaya sur un indice, des satellites, com distinction subtile résout plus bawah ambang atau gagal, peta r. Karena pem langsungan hidu dicielle débourse ue locale ou télé-détectée par batas ni selal bayaran tersebut ier. Cette p tanaman. Inov ogiq tidak terkait deng lte pour un ferm asi ini secara sign u memiliki insentif untuk mem mengurangi prem station météorol an o, comme la réco buat keputusan ifikan menurun i asuransi dan 5 de la mété kan biaya trans terbaik untuk kemeningkatkan une conséquence aksi dan resiko aksesibilitas. perusahaan asur ansi , 5. በቤትዎ ስንት ሰው ይኖራል? _______________________________________ 6. በቤትዎ ከሚኖሩት ሰዎች ስንቱ ከቤት ውጪ ይሰራሉ? _______________________________________ 7. ምን ያህል የእርሻ መሬት አለዎት? _______________________________________ 8. የትኛዎቹን የሰብል አይነቶች ያመርታሉ? በየትኛው የምርት ወቅት ነው የሚያመርቱት? _______________________________________ 8.1 በዋናነት የሚያመርቱት የትኛውን የሰብል አይነት ነው? _______________________________________ 8.2 ይህ የሰብል አይነት ባካባቢው በዋንኛነት ለምግብ የሚውል ሰብል ነው? 7
- 9.
- 10. Projects we look at today • Na#onal Agricultural Insurance Scheme (NAIS) and Weather Based Crop Insurance Scheme (WBCIS) – India • Mongolia Index Based Livestock Insurance (MIBLI) – Mongolia • Kilimo Salama – Kenya and Rwanda (IRI is partner) • Index Based Livestock Insurance (IBLI) – Kenya and Ethiopia: a satellite driven program with asset insurance • R4 Rural Resilience Ini#a#ve – Ethiopia and Senegal: a farmer led, unsubsidized integrated risk management project, with labor for insurance and satellite rainfall features (IRI is partner) My apologies if I get project facts wrong (or show bias)
- 11. India Aield crops CCAFS (websearch)
- 12. India Aield crops Na#onal Agricultural Insurance Scheme (NAIS) and Weather Based Crop Insurance Scheme (WBCIS) – India Others in the room know much more than I about this project • HUGE: 9 million weather, 22 million area yield • IniDal BASIX w-‐index ~2004ish, first index ahempt • Unsubsidized, unbundled-‐-‐grew to 10,000, • “disappoinDng” -‐-‐low take up, min purchase opDon, low re-‐enrollment (?) • Strategies for scale: compulsory, subsidized • Required to get subsidized government loan, Subsidized premium • Is this the scale model to follow (or scale for the sake of scale)? • Subsidized, mandatory standard for most “unsuccessful” projects • How are we we confident farmers want index, targets needs, models not wrong? • Rely on economic study evidence (iniDal evidence of shiVing to improved inputs) • Need addiDonal innovaDons, broader mix of demonstraDons
- 13. Mongolia Livestock Mark Rosenwald, CSP2
- 14. Mongolia Livestock Mongolia Index Based Livestock Insurance (MIBLI) Others know much more than I about this project • Area yield livestock—use aggregate livestock data for payouts • Directly insures producDve assets (not only outputs) • Government, WB reinsurance for huge loss (subsidy in tail?) • Linked to risk mgmt, preparedness, early warning systems • Long project, constantly growing (cumulaDve totals) • 2006: 2,400, 2008: 4,000, 2009: 14,000, 2013: 10% of herders • Requires good surveys of livestock everywhere every year What if surveys not available/too expensive?
- 15. Livestock, Kenya and Ethiopia livestockinsurance.files.wordpress.com
- 16. Livestock, Kenya and Ethiopia Index Based Livestock Insurance (IBLI) Others in room know much more than I about this project • Research MoDvated, research built • Targets poverty trap directly: insurance for producDve assets • Designed using research project data, analyses • • • • Satellite index instead of area yield from survey staDsDcs Subsidized risk premium Since 2010 ~4,400 total households purchased Extremely hard to reach clients • Impacts: insured weather drought significantly beher
- 17. Kilimo Salama, East Africa audiencescapes.org
- 18. Kilimo Salama, East Africa Syngenta Founda#on. Kenya, Rwanda + others IRI perspecDve (we are a project partner) • Weather index for rain-‐fed crops, started ~2009 • Biggest, fastest growing, unsubsidized project I know of • 2009: 200, 2012: 100,000 (in 2012 alone) • MulDple packages, efficient distribuDon channels • Unbundled, loan bundled, seed bundled, seed company members • Some phone sales/payments, some satellite, some raingauge • IniDal evidence of farmer increasing profit via insurance • Not subsidy—build on relaDonships, packages to improve produc#on
- 19. R4/HARITA Ethiopia/Senegal IRI perspecDve (we are a project partner) • R4 builds on HARITA, in Ethiopia Integrated risk management framework developed by Oxfam America, the Relief Society of Tigray (REST), together with Ethiopian farmers and several other naDonal and global partners, scaling to Senegal • R4: risk reducDon, risk transfer (insurance), prudent risk taking (microcredit), and risk reserves (savings) • Ethiopia sales and scaling • 2009: 200 farms,~20,000 Individual farms individually chose to buy in 2013 alone • Unsubsidized premium, nonloan bundled, nonmanditory • Work for insurance or insurance for cash • High demand (take-‐up exceeds project capacity) • Min purchase possible: ~$3 Ave package chosen: ~$19, Average cash only: ~$9 • Farmers overwhelmingly chose to pay more money for more frequent payouts • Satellite rainfall esDmate triggers payouts • Extremely parDcipatory farmer design, validaDon, sales process-‐each village leads their design through formal quanDtaDve parDcipatory process • Preliminary analysis suggests meaningful improvements in producDve assets from insurance
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- 21. Games to Aind production opportunities (Senegal)
- 22. Lessons from examples • Design insurance for a purpose • Target Development/AdaptaDon challenge, Build insurance to unlock producDon opportuniDes • Target appropriate groups/levels, leveraging other risk mgmt • Make insurance final piece of careful package • People who benefit from insurance should • Guide design, understand its strengths and weaknesses quanDtaDvely • Can have/build package appropriate for their opportuniDes/risks • Build • On strong relaDonships, solid science, strong distribuDon methods, validaDon and improvement, transparent, understandable products • Start slowly and carefully to scale quickly on solid foundaDon • Basis risk is central, but unless carefully thought out can lead along wrong path: • Farmer, science based approaches to basis risk minimizaDon • Reduce right risk: what cant be targeted through other approaches that blocks opportuniDes • We want farmers to be able to save crops in drought using an index payout
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