3rd West and Central Africa Agricultural Science Week and 10th General Assembly of CORAF/WECARD Ndjamena, Chad , 14th – 18 th May 2012 . Index based crop insurance in West Africa : p rinciples, existing projects and prospects L’Assurance agricole indicielle en Afrique de l’Ouest: - PowerPoint PPT Presentation
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3rd West and Central Africa Agricultural Science Week and 10th General Assembly of CORAF/WECARD Ndjamena, Chad, 14th – 18 th May 2012 Index based crop insurance in West Africa : principles, existing projects and prospects L’Assurance agricole indicielle en Afrique de l’Ouest: principes, premières réalisations et perspectives Bertrand MULLER 1 , Moussa SALL 4 , Antoine LEBLOIS 5 , Alpha BALDE 2 , Moustapha FALL 3 , Patrice KOUAKOU 3 et François AFFHOLDER 1 1 2 3 4 5
Transcript
3rd West and Central Africa Agricultural Science Weekand 10th General Assembly of CORAF/WECARD
Ndjamena, Chad, 14th – 18 th May 2012
Index based crop insurance in West Africa :principles, existing projects and prospects
L’Assurance agricole indicielle en Afrique de l’Ouest:principes, premières réalisations et perspectives
Bertrand MULLER1, Moussa SALL4, Antoine LEBLOIS5, Alpha BALDE2, Moustapha FALL3, Patrice KOUAKOU3 et François AFFHOLDER1
Crop productions are limited by constraints and risksMany constraints(problems) and risks can be controlled or
prevented: good practices, inputs, organization …
But residual risks: rainfall variability (droughts) massive locusts and birds attacks extremes temperatures, winds, floodingsAnd those risks are generally extremely covariant : affect
numerous people at the same time
Quelea Quelea
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Soudanian (600-1200mm) and Sahelian (200-500mm) areas: very important rainfall spatio-temporal variabilitySpatially, inter-annual and intra (seasonal) annual
Very variable (uncertain) start, dry-spells/droughtsSharp decrease in 1970 -> 1990 : 1st sign of
Agricultural (crops, animals) insurances appear as a possible tools to cope with residual risks by paying indemnities in case of low productions (losses)May secure part of farmers incomesMay secure credit programs : more sustainable
Mays allow access to credit for much more farmers May generate credit rate decrease
May contribute to a virtuous circle conducing to more investments (inputs, works) and productivity increase
Also considered as an adaptation tool to CC and CVInterest of backers : many money is comingVery ”fashion” theme for many stakeholders …
and a new market for (re-)insurersJust starting in West Africa but 10 years in Asia, S.Am.,
Insurance is a service :the insurer pays compensations in case of bad production /
losses due to one(some) problem(s) (residual ones) the insured farmer must pay an annual premiumnobody know when compensations (payouts) will come ..
Premium prices depend on:compensations/payouts : statistical average (on time and
space)service management costs : same for credit and all services
but insurance specificity is losses evaluationcommercial margin : same for credit and all servicesre-insurance costs : to allow the insurer to be able to
compensate simultaneously numerous customers if necessary … that is often the case in agriculture since risks are extremely covariant
Insurance and index based insurance principles
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Damages/losses evaluation is difficult/costly, particularly in South Countries where fields are small, disseminated, heterogeneous, etc.. risk of conflicts and “moral hazard”
Index based insurances (since early 2000s)No direct damages/losses evaluation (at fields) Damages/losses indirectly assessed through the
value of an index (indicator) related to some measurements For instance measures of temperature in one reference site=> reduced cost
Allow to insure several farmers of an area at the same time, and/or to have group contract => reduced cost
Additional ways to decrease costsManagement linked with creditMobile phones technologies (sms) for contracts and payments
Insurance and index based insurance principles
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Calibrated to protect investments and then credit systems : not for production/profit losses: would be too costly considering markets and risks frequencies (1 year out of 5-10)
“Real insurance” (private sector) is a priori reserved to “intensive (using inputs) and market linked productions” because farmers (or other stakeholder) have to pay premiumCotton, peanut, maize, rice, vegetables …
But could be partially subsided by Governments/Backers -> PPP
Index system can be used also for “social protection system”
Aggregated (average) yields index : “all-risks insurance”Specific index allow to link losses to only one specific
risk (whatever the other problems)Climate index : on temperature, rainfall measurementsSatellite data index : NDVI, biomass, ET%...Water level index for floodings
Insurance and index based insurance principles
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Main problem: “basic risk” i.e. risk that index values and thus payouts aren’t correctly linked to damagesDepend on kind and quality of indexOn spatial variability of reference observed
factor .. On variability of other conditions: soils, sowing dates,
varieties
Development of insurance requires efforts (time, money) to explain and convince farmers and others stakeholders:difficult to install “confidence” (trust) since there is no
“insurance culture” and because of “commercial” aspects …Also some initial investments in technologies : secured
raingauges, satellite data, yields controls …
Insurance and index based insurance principles
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Payouts depend on average yield compared to a reference yield level that is a fraction of the mean inter-annual yieldRequires a very good and confident “yields
measurements system” : cotton, sugarcane, vegetableQuite expensiveDifficult now with national statistics : spatial cover and
“quality” ..Better if also some control of practices at farmers fieldsProblem if bad yields due to human factor such as bad
fertilizer for instance … or decrease in tendency
Insurance based on aggregated yields
Evolutions rendements arachide et pluies Diourbel
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cum
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pluies rendements Lin. rendements Lin. pluies
Exemple fonctionnement assurance sur rendements agrégés
Based on rainfalls = “drought insurance” : most frequent
Many kinds of rainfall index:Simple : total rainfall amounts but don’t perform wellMost complex : simulated yield (or stress index) by crop
modelIntermediate (IRI, World Bank) and most used since
it is quite good and easy to explain to farmers and insurers : composite index based on rainfall amounts on different phases of crop cycles
Whatever the index : its parameters must be precisely defined based on agro-climato-economical analysisAttention to pure statistical index as “payout if observed value
reach percentile x%” : not recommended payouts not calibrated according to crop status induces differences in protection level between areas
Rainfall index based insurance
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Composite index: Simulation of a “virtual crop cycle” that starts within a
recommended sowing period according to a reference rainfall value (20 mm)
Fixed cycle and fixed phases (2 to 4) considered for insurance
“Trigger/Strike” and “Exit” reference rainfalls values for each phase to pilot payouts according to rainfalls during the phases
Rainfall index based insurance
Déficit Pl. (mm)
PHASE 1Semis et installation
PHASE 3Développement Fruits
Déficit Pl. (mm) Déficit Pl. (mm)
Calendrier Cultural Démarrage Période
de Semis
PHASE 2Croissance et Floraison
Indemnités = min (Coût prod. Total ; Somme paiements phases 1 + 2 + 3)
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Several parameters in the contract
Main problems : potential “basic risks” due toRainfall spatial variabilityNo good time synchronization between contract
Favorable environment promoting homogeneity and adequate practices limiting insured risks (sowing date, variety) and other problems (diseases, etc..)Index are calibrated and perform well for “good
practices”Losses due to other factors are not considered
Mathematical solutions to partially limit basic risks:Use of majored dekadal (10 days) rainfall amountsIndex related to several raingauges
How to improve “rainfall” index based insurance
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Most recommended : use of geospacialized data from satellites : pixelised rainfalls or relative evapotranspirations ET% (or mix), controlled/calibrated using some ground observationsBut researches are required to assess
accuracy of those methods and oftheir pertinence for crop insuranceAgrhymet - EARS projectIFAD/WFP/AFD project
Will be required also for extension/upscaling
Already on-going pilot projects in Mali, Burkina and Benin by PlaNet Guarantee and EARS, using 3km x 3km Meteosat info
How to improve “rainfall” index based insurance
EARS figure
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Other points to consider to improve insurance systems in the future“Personalized” contract considering sowing date
(within sowing window): info transmitted by mobile phones
“Sophisticated index”: simulated yield (or ET%) by crop model : more accurate and will allow to consider also over-rained period and/or integer other factors (Temp)
Because farmers who invest need precision / quality : in focus groups and meetings they ask very pertinent questions about index functioning
And since technologies allow (will allow) to do it
How to improve “rainfall” index based insurance
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Up to now only in Burkina Faso and Mali : on cotton and maize, less than 1000 farmers in 2011 ; PlaNet Guarantee / GIIF / EARS 20.000 farmers expected in 2012 …
Pilots will be implemented in 2012 in Senegal on maize and peanut : PG/GIIF+WorldBank+Cirad : 1000 farmers (??)
Pilots will be implemented in 2012 in Bénin on maize ; PG/GIIFDifferent studies : Ghana (GTZ), Bénin (WB), Cameroun, BOAD
Index based insurances experiences in West Africa
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USA : fully subsided (EU : prices are subsided ..)India : different programs sustained by Government
which subsides premium : more than 20 million farmersPositive for credit and allow government to help small
farmers Malawi, other projects: strong investments
GRET (2011) : “insurance programs could be economically profitable but require at the beginning many investments from Governments or Backers” feasibility studies (experts)equipments/technologiesexplanation/information, capacity building …Subsides generally required for small farmers
What we can learn from experiences
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When there is no subside (Mali, BF) : strategies consist in proposing very cheap products to launch insurance culture : but they poorly protect farmers … is that pertinent?
Subsides may also contribute to create equity between areasSenegal : subsides higher for Northern region in order
to have same premium and protection everywhere Better to consider insurance in agricultural policyBasic risk is a problemIFAD/WFP (2010) : “The future largely depends on
how the industry will be able to expand the technology frontier” (satellite and communications technologies)
What we can learn from experiences
Conclusions
Insurance could contribute to enhance productivity by securing credit (at least)
Index based insurances are quite cheap and thus allow providing insurance to much more farmers
Major technical issues to be addressed to reduce basis risk and improve quality of insurance products : satellite and mobile phone technologies and crop models also
Satellite technology also necessary for extension
Insurance development requires expensive investments at the beginning, including eventual premium subsides
Subsides/other mechanisms are also required for equityInsurance must be considered in agricultural policyGovernment must also regulate the sector (legal issues)
Recommendations
Let be optimistic : crop markets and agricultural policies in Africa will allow insurance development ..
Researchers must work on technical issues and also on economical and policy oneswhat are the adequate Private-Public-Partnership ?how to integer agricultural insurances and index based
insurances in global food security management system??
Researchers and development stakeholders must participate to insurance projects / feasibility studiesto technically help themto ensure transparency, equity and balance between
development and commercial issuesto capitalize experiences in order to advise Governments
With Moussa SALL (ISRA-BAME), Antoine LEBLOIS (CNRS-CIRED), Alpha BALDE (AfricaRice), Moustapha FALL (ISRA-CERAAS), Patrice KOUAKOU (ISRA-CERAAS) et François AFFHOLDER (CIRAD)
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