Insurance vital, but no magic bullet to fight drought in Africa.
LONDON (Thomson Reuters Foundation) – More developing countries urgently need insurance to cushion their farmers against weather extremes that can worsen poverty, but it is no magic bullet to ward off the escalating impacts of climate change, experts say.
"Insurance is … (for) when you have done everything you can and there is still a risk you cannot cover," said Beavogui.
Planning for those risks – such as the number of people a government would be unable to help in a crisis – is vital, he told the Thomson Reuters Foundation.
Insurance can be triggered more quickly than international aid, which can take months to fund.
ARC’s cover is based on a pre-agreed plan for how the government will use the payout.
Since ARC Ltd began issuing policies in 2014, eight nations have taken out insurance and four – Senegal, Mauritania, Niger and Malawi – have received payouts totaling $34 million.
But while drought last year left 6.5 million people in Malawi in need of food aid, Malawi did not receive an ARC payout until January.
Malawi took out insurance based on a crop – long-cycle maize – that, as it turned out, most farmers did not grow in the 2015/2016 season.
Insurance companies that pay out directly to farmers are still few and far between in many developing countries, and they offer limited services.