Swiss Re is to reinsure a five-year project that provides drought insurance for crops in Ethiopia, in a microinsurance program developed by the World Food Program (WFP) and Oxfam America.
The world’s biggest reinsurer will commit $1.25 million to the project, it said at the Agricultural Risk Management conference on Friday, which will cover the contract with farmers in Ethiopia as well as three future and yet to be determined countries.
The move comes as insurers seek ways to capitalize on the fledgling microinsurance sector which insures low-income people against specific perils in exchange for premiums proportionate to the likelihood and cost of the risk involved..
The initial project will allow Ethiopian farmers to use labor to pay for a weather index-based insurance contract that will compensate if a severe drought event hampers crop growth.
National insurers Africa Insurance Co. and Nyala Insurance Co. will insure the crop contracts, while Swiss Re will provide the reinsurance for the project – which has been co-ordinated by the WFP and Oxfam America.
With the country facing a drought-induced food crisis the United Nations appealed for $75 million in food and other aid in April for 2 million people in Ethiopia’s southern region.
Ethiopia is one of the world’s largest recipients of foreign aid, receiving more than $3 billion in 2008, according to the New York-based Human Rights Watch.
Oxfam America said it hoped the insurance initiative would prompt more products to include coverage for live stock in the future.
“We are providing insurance to those who cannot afford it. We have seen micro-insurance take off in the life, property and credit sectors. Agriculture is the final frontier,” said David Satterthwaite, senior global micro-insurance officer at Oxfam America.
In 2009 the first microinsurance fund LeapFrog Investments launched with Zurich, Munich Re, Allianz and SCOR as members.
The micro-insurance project in Ethiopia will start in November and Oxfam and the WFP want to raise a total of $28 million for the programme.
(Editing by Greg Mahlich)
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