Is drought insurance feasible in Ethiopia?
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Wed, 04/01/2009 - 14:44
There was a drought insurance pilot project in Ethiopia some couple of years ago. WFP reported it was succesfull. However during that project period there was no drought. That meanse no pay outs. In this situation can we say effective? I hope this project doesn't consider the pastoralists for the nomads are moving. What do you think collegues?
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I think the Ethiopia Drought Insurance Pilot Project of the World Food Program and the World Bank of the United Nations has shown that it is feasible to use market mechanisms to finance drought risk in Ethiopia. As part of the pilot, WFP obtained insurance through a contract with AXA Re, a Paris-based reinsurer using a sophisticated index based on Ethiopia’s historical rainfall and agricultural output it is possible to develop objective, timely, and accurate indicators for triggering drought assistance. The Ethiopian agricultural drought index referred to above shows an 80% correlation with the total number of historical food-aid beneficiaries. This suggests that such an index can be used as a relatively good proxy of actual aggregate needs in case of drought. Field visits have indicated that the index has so far correctly captured events on the ground. Moreover, the index is updated on a 10-day basis, which greatly improves the timeliness of information.
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