The companies behind the R4 Rural Resilience Initiative weather-index microinsurance pilot program, which is currently operating in Ethiopia but plans to expand, have announced that the first successful payout to policyholders has been successfully made. Over 1,800 farmers in seven villages experienced drought conditions that triggered a payout under the terms of their index-based insurance policies. Each gets a share of the total payout of $17,392.
“The recent payouts show how even the poorest communities in Ethiopia can benefit from insurance when implemented through innovative programs such as HARITA,” says Christina Ulardic, Head of Market Development Africa for Swiss Re’s Corporate Solutions business. “Swiss Re is proud to be associated with this groundbreaking initiative and, together with its partners, is committed to helping build a viable risk transfer market in Africa.”
The microinsurance program is another example of a successful weather-index based scheme which aims to help rural farmers recover from extreme weather conditions. While perhaps not covering the total loss, the payouts enable farmers to keep up with loan repayments from microfinance organisations and so be able to continue farming and feeding themselves and their families.
“Last season the rain was bad and we didn’t produce what we had hoped for,” said Gebre Kiros Teklehaimanot, a policyholder. “So the payment is good for us. We know it won’t cover all our losses, but for me, at least, I can cover the loan I took to buy fertilizers. I am still a big believer in insurance and will go back to my village and encourage others who did not register last year.”
“If the insurance helps farmers cover fertilizer loans in the worst years, farmers could use these loans to increase yields in the rest of the years. This has the potential to really improve a farmer’s situation,” said Daniel Osgood, an economist at the International Research Institute for Climate and Society, one of the partners in the program.