West Africa to benefit as WFP expands insurance programmes

The World Food Programme (WFP) will expand its insurance programmes in East and West Africa, as well as Asia, this year while continuing to scale up investments in existing programme countries.

Gernot Laganda, chief of climate and disaster risk reduction programmes at WFP, said this in his foreword to the WFP’s “Climate risk insurance – Annual Report 2021” released recently.

He also said that efforts will be intensified to improve integration and layering between different risk financing solutions, including forecast-based financing and contingency finance for governments, and village savings mechanisms for local communities.

Specific focus will be put on compiling lessons from the field and gathering robust evidence on the benefits of managing risk in a forward-looking and preventative manner. Additional partnerships and resources will be sought to sustainably expand and scale up climate risk insurance coverage, generate evidence, and build institutional capacity for risk financing.

He added that investing in approaches to prevent, minimise and address loss and damage associated with the adverse effects of climate change is crucial for WFP. These approaches are focused on helping governments and communities to manage climate risks in a forward- looking manner and encompass a range of climate and disaster risk financing instruments – including climate risk insurance programmes.

Climate risk insurance enables vulnerable people to better cope with climate shocks. It can support smallholder farmers to absorb the effects of failed harvests, pastoralists to keep providing food and veterinary care to their livestock, micro and small entrepreneurs to continue their productive activities, and governments and humanitarian agencies to launch well-coordinated, efficient and early responses. When integrated with other risk management strategies such as nature-based protection, informal saving schemes or social safety nets, insurance solutions offer important financial protection from potentially catastrophic events.

Over the past decade, WFP has become the UN’s leading organisation making climate risk insurance solutions work for food-insecure populations. On the community level, WFP promotes microinsurance solutions through its flagship approach for integrated climate risk management, the R4 Rural Resilience Initiative (R4). The approach combines a set of integrated risk management strategies that address both the climatic as well as non-climatic drivers of vulnerability. On the level of government systems, WFP promotes sovereign insurance products through its ARC Replica (offered by Africa Risk Capacity Group) and other insurance programmes. These solutions allow governments and WFP to protect vulnerable people and communities with pre-arranged funding that enables rapid responses to climate shocks.

In 2021, which was a year still marked by the COVID-19 pandemic and its resulting economic and social impacts, WFP was able to protect 2.7 million vulnerable people in 19 countries with climate risk insurance products, the report stated. 2021 was among the seven warmest years on record and, like previous years, adds to the list of worst years in terms of climate-related disasters.

Rural Resilience Initiative
Under the WFP’s R4 Rural Resilience Initiative, the organisation provided access to microinsurance solutions to nearly 395,000 households in 14 countries, benefitting 1.8 million people. Through its macro insurance programmes, WFP supported the governments of Burkina Faso, The Gambia, Mali, Mauritania, and Zimbabwe with macro-level climate risk financing instruments, protecting 750,000 people from catastrophic drought events. WFP also piloted sovereign risk financing approaches in Dominica, a country in the Caribbean.

Payouts
In 2021, several major payouts were triggered under WFP-supported insurance programmes. In Ethiopia, following devastating drought conditions, over $980,000 in payouts were triggered under WFP’s Satellite Index Insurance for Pastoralists in Ethiopia (SIIPE) programme, benefitting nearly 125,000 people in the Somali region. Another payout of the same amount is about to be disbursed in 2022. After drought and pests destroyed crops during the 2020/2021 growing season, crop index insurance policies in Malawi triggered one of the largest payouts in Africa, totalling $2.45 million, benefitting around 325,000 people.

In Madagascar, after two failed planting seasons, 17,500 people benefitted from payouts of $480,000. In Mali, after a late onset of the 2021 growing season resulted in crop failures, WFP received an ARC Replica insurance payout of $7.1 million to assist 204,000 people with emergency and resilience-building efforts in the country’s drought-affected regions.

In addition, WFP provided technical assistance to the Government of Zambia, supporting the design of an improved index insurance product under the Government’s Farmer Input Support Programme (FISP), which insured over 1m people for the 2021/22 agricultural season.

Global
2021 also saw the expansion of WFP’s insurance programmes in the Latin America and Caribbean region.

WFP has continued its engagement with global insurance networks and platforms in 2021, notably—the InsuResilience Global Partnership (IGP), the Insurance Development Forum (IDF) and the Micro Insurance Network (MIN)—and strengthened partnerships with international agencies and institutions, including the International Fund for Agricultural Development (IFAD) and the Africa Risk Capacity (ARC). These partnerships enable the scaling-up of climate and disaster risk finance and insurance solutions.