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Policy brief: Insurance as an agricultural disaster risk management tool; Evidence and lessons learned from South Asia

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OVERVIEW

Pilot projects in India and Bangladesh demonstrate that index-based weather insurance products, developed using satellite technology, can reduce the financial risks to smallholder farmers from floods and droughts. Scaling up such schemes has the potential to meet the needs of very vulnerable groups, especially women and assist governments in meeting global development goals.

CLIMATE CONTEXT

Climate change magnifies the risk and cost of disasters. The economic impact of environment-related disasters has risen from around USD $25 billion per year in the 1980s to USD $160 billion in 2018 (Baur and Parker, 2015; Munich Re, 2018). In South Asia, climate change is already increasing the frequency and intensity of disasters, contributing to population displacement, exacerbating conflicts and affecting efforts to reduce poverty and inequality. Both sudden-onset disasters (floods) and slow-onset events (drought) have impacts on livelihoods, health and agricultural yields (Amarnath et al. 2017).

Many of the region’s most vulnerable people live in vast agrarian belts within the Indus,
Ganges and Brahmaputra-Meghna river basins. Variation in the annual monsoon, and natural phenomenon such as El Niño and La Niña, can cause catastrophic flood and drought events. These affect poor and vulnerable populations who depend on agriculture for livelihoods and subsistence. In 2019, torrential monsoon rains triggered floods and landslides in Bangladesh, India and Nepal, killing more than 2,000 people and affecting 19.5 million (ReliefWeb, 2019a).

The economic cost and humanitarian consequences of drought are equally enormous. Twenty- one major drought events reported between 1990 and 2019 affected more than 720 million people, with economic losses exceeding USD $6.5 billion (EM-DAT, 2019). The drought of 2018 was particularly severe, affecting 250 million people. An estimated 66.5 million hectares (ha) of agricultural area were exposed to severe drought in South Asia (SADMS Bulletin, 2018).