New index-based weather insurance product for farmers in Kenya

The spread of index-based weather insurance into the developing world continues apace as new products are launched on a regular basis which allow residents, farmers, business owners and governments to hedge the risks of weather impacting their livelihood. The speed with which weather-index insurance has been adopted puts to shame many developed western nations who have yet to really adopt weather risk management as an important business process.

The latest weather-index insurance product we’ve been alerted to is for small scale Sorghum farmers in Kenya. The product, launched by local insurer Jubilee Insurance, is designed to protect farmers from drought. “With this insurance cover, Jubilee will provide protection to small scale farmers for whom the acuteness of drought has made farming of maize untenable, forcing them to turn to crops like sorghum,” said Jubilee Kenya General Manager, Short Term Business, Lydia Kibaara.

One of the positive aspects of the way weather insurance is being adopted in Africa is that it tends to be considered part of a holistic risk management approach, so is often tied to loans to protect both the person taking out the loan and the institution making the loan or to purchase of products such as seed or necessary equipment. This double hedge is helping industries stay afloat in areas afflicted by some of the most inclement weather on the planet. Of course it doesn’t always work, and microinsurance is still in its infancy, however it is encouraging to see it spread and it’s clear that there is potential for some of these products to be marketed in western, developed countries too (the market potential is huge for weather-index insurance).

For this specific product Jubilee is working with an organisation called Financial Sector Deepening (FSD) who help support index insurance initiatives and is setting up automated weather stations to help capture weather data against which claims can be measured and triggered.

“An effective risk transfer mechanism promises the most viable option with the twin effect of reducing poverty and stimulating economic growth,” said MsKibaara. “We expect sorghum index insurance to enhance access to agricultural micro-insurance in sorghum growing areas.”