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FESA Micro-insurance: Crop insurance reaching every farmer in Africa

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Delft, April 2014

Costs and lack of data are major challenges in de development of agricultural insurance in Africa. These problems have effectively been addressed and solved by EARS Earth Environment Monitoring from Delft, the Netherlands. The company has successfully developed and demonstrated a Meteosat based index insurance system that can provide affordable drought and excessive precipitation insurance to every farmer in Africa. The final technical report has just been published and is now available to interested parties.

FESA Micro-insurance is a Meteosat based drought and excessive precipitation index insurance system developed by EARS. The initiative started in 2009 and was co-funded by the Netherlands Ministry of Foreign Affairs as a contribution to the UN Millennium goals. FESA has been successful in developing low cost drought and excessive precipitation insurance in Marocco, Senegal, Mali, Burkina Faso, Benin, Kenya, Tanzania, Rwanda, Uganda, Malawi, Mozambique and Botswana. The number of insured farmers is expected to grow to one million during the next three to five years.

The main challenges that crop insurance in Africa has been facing are related to scale and costs. Low costs are considered mandatory and would be enabled by using index insurance. But throughout Africa index insurance has been frustrated by lack of data. EARS now provides a solution to this problem. The company, specialized in satellite data for climate, water and food, has processed 32 year of Meteosat data to evaporation and precipitation data fields that cover the entire African continent at 3 km resolution. Based on these data, EARS designs index insurance solutions for any location in Africa. Using its Meteosat receiving system, the company will also monitor the insurance index during the growing season and calculate and report pay-out to the insurance stakeholders.

Reaching scale is not only a matter of having plenty data, but also requires adequate processing techniques. EARS developed a geo-information approach to meet this challenge. After choosing from a range of design options and specifying the corresponding input parameters, 32 year of index data are automatically processed to national or regional maps of burning costs or pure risk premium. These may then be averaged by administrative area. In this way, national drought insurance has been developed for livestock, maize and beans in Uganda.

The report “FESA Micro-insurance: Crop insurance reaching every farmer in Africa” has just been published and provides an overview of the technology and piloting results. The report is complete in addressing: the social role of agricultural insurance, the index insurance alternatives, the derivation and validation of Meteosat derived indices, the comparison of evapotranspiration and precipitation data performance, the design of the index insurance and the results of a range of pilot projects in west, east and southern Africa. A study of the Agricultural Economic Institute of Wageningen University Research concludes that the new satellite derived index insurance products offer low basis risk and unlimited scope for scaling up, being strong advantages over traditional index insurance. The 122 pages final report “FESA Micro-insurance: Crop insurance reaching every farmer in Africa” may be downloaded from http://www.ears.nl/fesa.php.

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