By Dean Simuchimba
The 2023/24 farming season was one of the worst experienced in the Sub Saharan African region for rain-fed agricultural crops due to the devastating drought caused by the El-Nino weather phenomenon. The event induced by dry and hot weather from ocean currents decimated crops leaving behind scorched fields and nothing for farmers to harvest. It also triggered floods in some parts of the region, destroying crops and property.
However, the insurance market responded in earnest with timely payouts to ensure the affected farmers livelihoods where cushioned. The El-Nino impact saw a number of countries in Southern Africa experience the lowest mid-season rainfall in 40 years. The worst hit countries included Zambia, Malawi and Zimbabwe prompting Authorities in these countries to declare a state of National Drought Disaster.
This was on the backdrop that more than 70percent of grain output in these countries is produced by smallholder farmers who depend on rainfed agriculture thereby putting the entire regions food security in limbo.
In some parts of the region the El-Nino induced unprecedented floods due to heavy rains with the worst affected countries being Kenya, Mozambique and Madagascar.
The World Food Program (WFP) estimated about 2million families in Malawi, 1million in Zambia and 3million in Zimbabwe where critically impacted by the drought. The three countries saw a slump in Maize production by between 40 to 80percent.
In responding to this catastrophe, the insurance market through government or sovereign insurance pooling facilities and various donor and private sector driven parametric solutions responded by providing relief through insurance payouts that where triggered by the drought and floods. At sovereign level, insurance payouts amounting to US63million were paid out to the worst hit countries in Southern Africa that included payouts of US11.6million to Malawi, US5.5million to Mozambique, US13.3million to Zambia and US31.8million to Zimbabwe.
Through the donor and private sector insurance initiatives, the World Food Program (WFP) disbursed about US10million of insurance payouts to almost 280,000 affected people in the region. Further One Acre Fund, a global social enterprise working with small holder farmers released US812,000 in insurance payouts for 80,000 small holder farmers in Zambia and Malawi.
In Kenya a new Index Based Flood Insurance product for farmers on river banks triggered a payout of US109,000 that benefited about 300 households that where affected by the El Nino floods in November 2023.
The Zambian government through the private sector driven index insurance for beneficiaries of the Farmer Input Support Program (FISP) is expected to receive an insurance payout of about US40million on behalf of 1million farmers for the loss of 1 million hectares of cultivated crop, representing about half of the nations planted area.
To underscore the gravity of the impact that El Nino has had on the insurance market, Agrotosh Mookerjee a renowned Actuarial scientist said and i quote “This year the El Nino related severe drought in Southern Africa and floods in Eastern Africa justifiably led to significant claims being triggered and paid out. Weather index and Yield index products developed by Risk Shield and myself have led to payouts triggered of approximately US8.2million in 2024 so far at a claims ratio of 131percent in Kenya, Malawi, Rwanda and Zambia” end quote.
The response of the market to the impact of El Nino clearly demonstrates the robustness of the industry in managing climate risks and further underscores the power of parametric insurance solutions in fostering resilience within communities facing the brunt of nature’s challenges. It is however imperative that in addition to insurance, improved risk adaptation and mitigation strategies be employed to ensure a more secure and sustainable future for smallholder farmers.