Zambia

Technical report on FISP index insurance product improvement

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Evaluation and Lessons Learned
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Summary

The Ministry of Agriculture, IFAD and WFP, with support of the International Research Institute for Climate and Society (IRI) and financial partners Mayfair, Zep Re and ACRE, collaborated on the design of an improved index insurance product for the Government of Zambia’s Farmer Input Support Program (FISP) for the 2021/22 season.

This improved product incorporates best practices from both the current FISP insurance product and WFP’s Rural Resilience Initiative (R4) project. A key aspect of this “blended” index is incorporating the perspective of farmers to ensure that the product accurately reflects local patterns of vulnerability and risk. To this end, WFP and IRI supported MoA in the collection of focus group data from almost 1,000 agricultural camps across the country, the largest such exercise IRI has ever supported. This data was then used by the inter-ministerial technical working group to tune the index, using interactive tools developed by IRI.

This document presents an update on milestones, workshops and activities related to the FISP index insurance program in 2020/21, as well as a summary of the inter-ministerial technical working group on index insurance recommendations for the 2021/22 index.

Background

In 2014, World Food Programme, in partnership with the Ministry of Agriculture, launched the R4 smallholder support programme with a focus on resilience across 5 districts (namely Gwembe, Mazabuka, Monze, Namwala, and Pemba in southern Zambia), supported by the Swiss Agency for Development and Cooperation’s (SDC) Regional Office for Southern Africa, the Korea International Cooperation Agency (KOICA) and the Green Climate Fund. The intervention has reached 18,083 farmers with an integrated risk management approach, including conservation agriculture, risk transfer (index insurance) and risk retention (savings services). Following five consecutive seasons of offering insurance, practical and technical lessons learned on index insurance in Zambia have been gained and recorded to inform the expansion of such initiatives.

In a bid to support Government systems, WFP, with support from the International Fund for Agricultural Development (IFAD) under the Adaptation for Smallholder Agriculture Programme - II (ASAP II) and the International Research Institute for Climate and Society (IRI) at Columbia University, has partnered with the Ministry of Agriculture to support the strengthening of national capacities, systems, and partnerships with private sector for climate risk financing and risk transfer.

Within the scope of partnership, the Ministry of Agriculture, IFAD and WFP agreed to the following:

  • Support capacity building efforts on index design

  • Kick start the activities around improving product features of the existing FISP weather index product

  • Support the formation of a technical inter-ministerial working group on index design

  • Development of a detailed training roadmap for the technical inter-ministerial working group on index design

To this end, WFP and IRI supported the Ministry of Agriculture in conducting the first ever inter-ministerial working group on weather index design. The workshop attracted participants from various organizations including Smart Zambia, Remote Sensing, Central Statistics Office, Meteorological Department, State Insurance Company, Pensions and Insurance Authority (PIA), Professional Life Insurance and Madison Insurance).

It was agreed to use the WFP supported approach to develop new windows to target the most vulnerable timings across the FISP portfolio. This is because, although the current FISP product has smooth coverage across the growing season, it does not have a mechanism for tuning coverage to target the times that have the most vulnerability, and this happens to be one of the strengths of the WFP supported index. IRI provided its tools and processes to support the Zambian Government and local stakeholders to map out zones across the country, assemble official data sources, perform strategic sampled site visits, and support the “technical working group” perform the parameter optimization to reflect the most vulnerable periods and hence best windows (and perhaps other parameters) for each zone. This process was undertaken in early 2021, resulting in potential indexes for the whole country developed by the technical working group. Now that the product is developed, the technical working group will be able to make informed decisions about what commercial rollout choices to make.