Drought: Weather index-based agriculture insurance on the cards

By Dumisani Nyoni

The Insurance and Pensions Commission (IPEC) is set to introduce weather index-based agriculture insurance meant to protect livestock and crop farmers in drought-prone areas from climate-related losses.

Severe droughts, especially in the Matabeleland region and Midlands province, have had devastating effects on farmers, wiping out most of their livestock and leading to distress sales.

For instance, official figures state that Matabeleland South province alone last year lost more than 25 000 cattle due to drought, while 6 220 deaths were recorded in Matabeleland North.

Zimbabwe has a national cattle herd of 5,7 million down from nearly six million cattle in 1996 due to droughts which have killed thousands of cattle especially in the southern region.

The national herd is again at risk this year, with water bodies in Matabeleland South, Matabeleland North, Midlands, Masvingo and Manicaland, drying up while pastures fast depleting.

These provinces account for 80% of the national beef cattle herd.

A latest report prepared by Reneth Mano, an agricultural economist with the Livestock and Meat Advisory Council, reveals that about 1.8 million cattle in Zimbabwe’s smallholder communal and A1 farming areas with an estimated market value of US$942 million are at risk of being wiped out by drought-induced starvation this year.

In a bid to buffer local livestock and crop farmers from these risks, IPEC is looking forward to introducing weather index-based agriculture insurance.

“IPEC is working on a framework to introduce weather index-based agriculture insurance aimed at boosting the uptake of agriculture insurance,” Insurance Council of Zimbabwe executive officer Tendai Karonga said while addressing journalists during the insurance and pension mentorship programme held on Tuesday this week.

“In addition, insurers are being encouraged to offer community-based agricultural insurances for the subsistence and small-scale farmers taking advantage of economies of scale concept,” he said.

Karonga said ICZ was carrying out public awareness and educational campaigns on insurance products and services.

“The ICZ 2021 awareness strategy will target educating school children on insurance and its importance to cultivate a culture of insurance consumption from an early age,” he said.

ICZ is an independent self-governing association of short-term insurers and reinsurers in Zimbabwe duly registered by IPEC.

Weather index-based agriculture insurance was first introduced in Kenya in 2010 as a pilot project for livestock farmers and has since been extended into Ethiopia, and is under consideration in several other east African countries.

Unlike traditional insurance programs which pay out on the loss of the animal, this type of insurance is tied to climatic conditions such as the amount of rainfall and distribution of pasture availability over a season.

Weather index-based agriculture insurance, according to the International Livestock Research Institute, avoids the moral hazards of traditional insurance programs while giving farmers the resources to help their animals survive periods of sustained crises.

The total number of cattle that should be under the weather-index insurance scheme, according to economists, should be more than 10 000 in a particular community

Zimbabwe’s economy is agro-based, with agriculture contributing about 17% to the GDP and about 60% of raw materials to the manufacturing industry.

Despite the agricultural sector being one of the major drivers of the economy, its consumption of insurance service is very minimal, contributing 1.45% to the gross premium written (GPW) for the period January to June 2020, according to Karonga.

Karonga said the uptake of agricultural insurance remains subdued due to various factors such as lack of insurance products that address the needs of smallholder and subsistence farmers who are the majority in Zimbabwe following the land redistribution exercise.

Some of the reasons include mistrust in insurance services, reliance on traditional self-insurance in risk and loss management, thin profit margins in the sector particularly for small scale commercial and subsistence farmers as well as lack of knowledge on the benefits of insurance and risk management services.

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