Webinar

20
Sep
Innovative approaches to address climate risk and strengthen resilience: Linking inclusive agricultural insurance to Anticipatory Action and emergency response

Tuesday, September 20, 2022

 Time: 14.30-16.00 CEST

Background

Fulfilling the 2030 Agenda depends crucially on achieving progress in rural areas, which is where most of the poor and hungry lives. In recent years, the possibility of using public and development finance catalytically to mobilise commercial capital for investment in the agri-food sector has grown in interest. Historically, the agriculture sector has faced critical bottlenecks in receiving investments due to high risks and the perception of scarce returns. Smallholder farmers face a range of shocks and challenges beyond their control that can drastically affect their incomes and livelihoods. Climate change is a crucial driver behind agricultural shocks. Agricultural shocks resulting from climate-induced stresses such as drought and floods, are impacting millions of smallholder farmers, from reduced productivity, poor yields to total loss of an entire season’s harvest. Unpredictable weather patterns and related risks limit both the desire and ability of smallholder farmers to undertake farm investments; keeping them trapped in a vicious cycle of subsistence and vulnerability to shocks – impacting their food security and wellbeing.

As a result, financial institutions see agricultural lending as inherently risky and costly. Small-scale actors face even higher barriers to accessing investments and loans, which have resulted in limited access to financial services. Inclusive insurance is a vital instrument to offer safety nets for such shocks brought by climate change and to adopt sustainable agricultural production. With the insurance coverage, the risk of loan default caused by farmers suffering income loss from severe climate events has been reduced, and the credit profile of the producers will be strengthened therefore promote their access to appropriate and affordable financial services to sustain their production and livelihood. However, developing, distributing and scaling up smallholder agriculture insurance products has proven complex and challenging due to the underlying limitations of traditional indemnity-based models, the high acquisition costs and low profitability / returns associated with serving poorer population segments, and limited knowledge, awareness and trust of insurance in general amongst smallholders – who struggle to see sufficient value, given the often convoluted and inefficient payout mechanisms.

Technologies and data modeling systems have evolved to help overcome the high transaction costs associated with traditional indemnity-based crop insurance, where payouts are explicitly based on measured loss. Small-scale producers, who were previously considered uninsurable, can now gain access to mobile-enabled parametric[1] (mainly index-based) insurance products.

Parametric agricultural insurance products could strengthen smallholder producers’ resilience towards climate-related disaster, contribute to household food and livelihood security under extreme weather conditions, and develop an effective extension system integrated with national food safety emergency response plans in countries affected by extreme climate conditions.

Meanwhile, Anticipatory Action (AA) is another approach increasingly adopted to reduce the impacts of hazards on agricultural livelihoods and food security. It links early warnings to flexible financial instruments in order to trigger actions that mitigate the impact of forecast shocks on the most vulnerable people.  AAs are short-term disaster risk management interventions that are implemented during the critical time window between an early warning trigger and the actual occurrence of the shock. Examples of anticipatory actions include the provision of cash, waterproof silos, provision of drought-resistant crop seeds, animal health support and animal feed ahead of drought; support the evacuation of livestock, among others. Such actions share the same goal of saving lives and livelihoods, whilst protecting the assets of people at risk.

Both AA and insurance complement emergency response operations. However, they go beyond response as they share a common vision of shifting from managing disaster response to managing disaster risk, which is fundamental to ensure the promotion of resilient food systems and communities that do not fall into dependence on humanitarian assistance after each shock. Therefore, reinforcing the linkages between AA and agricultural insurance has the potential to bring benefits to both areas of work, eventually providing more effective support to vulnerable farmers exposed to recurrent hazards.

Objective

This webinar will discuss how to effectively improve the inclusivity of agricultural (parametric) insurance to serve small-scale producers, and exploring how insurance can be used as a complementary modality to Anticipatory Action and emergency response operations and reinforce each other in enhancing small-scale producers’ resilience towards disaster events, and what is the role of public sector and the partnership public and private that is needed to build resilience of smallholder farmers. Moreover, the webinar hopes to provide a platform where panellists and the audience will brainstorm together what is a feasible and possible collaboration between applying the anticipatory approach/emergency response and insurance mechanism to enhance small-scale producers’ resilience against climate risk.

Agenda & Speakers:      

  • Opening remark by Phillips Lauren, Deputy Director, FAO Inclusive Rural Transformation and Gender Equality Division (ESP)
  • Present key messages and take-away of a global stocktaking study on the current state of Agri-insurance for Smallholder Farmers–Elodie de Warlincourt, Senior Portfolio Manager at SwissRe Foundation
  • Introduce briefly Anticipatory Action (AA); Illustrate the importance and potential of insurance among the multitude of risk financing methods and how insurance as a risk financing method can interact with the livelihood work of FAO both in AA and response — Shukri Ahmed, Deputy Director at FAO Office of Emergencies and Resilience Division (OER)
  • Outline efforts in using macro-sovereign level insurance as an early action mechanism to prevent food insecurity caused by drought, and how acting and prepositioning financing across seasonal “windows of opportunity” can serve to reduce drought impact for people at risk; Explore whether insurance instruments on these anticipatory windows as well as ex-post response could help us to finance and reduce loss and damage in the face of climate change — Anna Farina, Crisis Anticipation and Risk Finance Operations Lead at START Network
  • Present an index insurance case study and discuss what roles public sector can play and the public and private partnership — Mario Wilhelm, Agricultural Insurance Senior expert in SwissRe Foundation
  • Panel discussion and Q&A

Moderated by Phillips Lauren, FAO ESP

Duration:

In total 90 minutes with four 15-minute presentations and 20 minutes of Q&A through Zoom

 

[1] Parametric (or index-based) insurance is a type of insurance that covers the probability of a predefined event happening instead of indemnifying the actual loss incurred. It is an agreement to make a payment upon the occurrence of a triggering event and as such is detached of an underlying physical asset or piece of infrastructure.