Satellite key to affordable drought insurance for African farmers

Report
from EARS
Published on 03 Sep 2012

FESA Micro-insurance has developed drought and excessive precipitation insurance using 30 year of Meteosat data. In 2012 the technology has reached considerable scale, insuring potentially several hundred thousands of farmers. A major step towards affordable crop insurance, which will help African farmers to invest in better seed and fertilizer and in this way realize higher crop production and income.

Delft, September 3, 2012

Increased food production requires African farmers to invest in better seeds, fertilizer and pesticides. In this way production and income may grow two or threefold. But most farmers don’t have the cash and need a loan for this purpose. MFI’s are reluctant to provide such loans, as crop failure due to drought or excessive precipitation would make redemption impossible. Micro-insurance is recognized as the key to this problem. It would enable African farmer to climb out of their poverty trap and start an upward spiral of increased income, savings and further investments.

As the cost of traditional insurance is high, weather index insurance has been advocated as a solution. However, the number of weather stations in Africa is too low. Adding stations entails high costs and would not provide the historical time series needed for proper risk analysis.

In 2009, EARS Earth Environment Monitoring, a remote sensing company in the Netherlands, started FESA Micro-insurance with the aim to develop low cost, satellite based micro-insurance, reaching every farmer in Africa. To this end 30 year of Meteosat hourly images were processed to 10 daily Relative Evapotranspiration (RE) and Cold Cloud Duration (CCD) data fields. These data serve as insurance index of agricultural drought and excessive precipitation, respectively. They cover the entire African continent at a resolution of 3 km.

Since 2011 EARS is supporting insurance projects of PlaNet Guarantee, MicroEnsure, Syngenta Foundation and Cardano. Insurances have been developed for maize, wheat, rice, beans and cotton in Mali, Burkina Faso, Benin, Kenya, Tanzania and Rwanda. EARS is providing for the data collection, risk analysis, technical insurance development, index monitoring and pay-out reporting. These services are readily implemented by the insurer.

Today this new approach to crop insurance has reached considerable scale. This is important so as to keep overhead costs low. The project with partner PlaNet Guarantee in West Africa, involves more than 800 locations. Each location may cover a farming community. In this way several hundred thousands of farmers can be insured. Yearly costs of data collection, index development and index monitoring would remain below 0.5 euro/farmer, a very small part of the insurance premium. Therefore, FESA micro-insurance represents a major breakthrough towards affordable crop insurance. Everywhere in Africa!

For information please contact:
Andries Rosema, EARS Earth Environment Monitoring BV Kanaalweg 1, 2628 EB Delft, the Netherlands
Email: andries.rosema@ears.nl, tel +31-15-2562404
Website: www.ears.nl