Less than ten per cent of the maize growers in Embu have opted for a weather index insurance.
Photo: Matin Qaim


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Weather index insurance has often been hailed as a blessing for smallholder farmers to cope with climate shocks. These expectations were overblown. Generally, farmers’ uptake of index insurance remains low. But this does not mean that there is no potential. Research from Kenya shows that better tailoring index insurance to smallholder conditions could increase uptake with significantly positive effects for agricultural development.

Climate change will affect agricultural production through higher mean temperatures and more frequent weather extremes. Smallholder farmers are particularly vulnerable to climate shocks. After severe weather events, small farm households often end up selling productive assets to smooth consumption. Frequent weather extremes are also associated with risk-avoidance strategies, such as low adoption of productivity-enhancing inputs and technologies. Thus, climate shocks can cause and perpetuate poverty traps. Agricultural insurance could help, but is literally non-existent in most developing countries due to various constraints.

Weather index insurance (WII) is a relatively new type of insurance that could help overcome some of the problems with traditional insurance schemes. Unlike indemnity-based crop insurance, where an insured farmer receives compensation for the verifiable loss at the end of the growing season, WII makes claim payments based on the realisation of an objectively measured weather variable (e.g. rainfall) that is correlated with production losses. Neither the insured farmer nor the insurer can easily manipulate rainfall measurements, which reduces issues of opportunistic behaviour.

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