Pilot Microinsurance Program Has a Successful Payout to over 1,800 Ethiopian Farmers after Drought

17 November 2011, Zurich

Oxfam America, Swiss Re and the International Research Institute for Climate and Society (IRI) announced today that their innovative microinsurance program for small scale farmers in Northern Ethiopia had its first successful payout to affected policyholders this past weekend. They were joined by their partners, the Relief Society of Tigray, Dedebit Credit and Savings Institution, Nyala Insurance Company, and Africa Insurance Company, in making the announcement.

More than 1,800 farmers in seven villages experienced drought conditions that triggered payouts.  Each will get a share of the total $17,392 in payouts.

"The recent payouts show how even the poorest communities in Ethiopia can benefit from insurance when implemented through innovative programs such as HARITA," says Christina Ulardic, Head of Market Development Africa for Swiss Re's Corporate Solutions business.  "Swiss Re is proud to be associated with this groundbreaking initiative and, together with its partners, is committed to helping build a viable risk transfer market in Africa."

The HARITA (Horn of Africa Risk Transfer for Adaptation) pilot was designed as a way for Ethiopia’s poorest farmers to get weather insurance for their crops, allowing more than 13,000 this year to buy themselves a bit of security against changing weather patterns.  The project is funded by the Rockefeller Foundation and Swiss Re.

“Last season the rain was bad and we didn’t produce what we had hoped for,” said Gebre Kiros Teklehaimanot, a policyholder. “So the payment is good for us. We know it won’t cover all our losses, but for me, at least, I can cover the loan I took to buy fertilizers.  I am still a big believer in insurance and will go back to my village and encourage others who did not register last year.”

“If the insurance helps farmers cover fertilizer loans in the worst years, farmers could use these loans to increase yields in the rest of the years. This has the potential to really improve a farmer’s situation,” said Daniel Osgood, an economist at IRI.

In its three years of delivery, this pilot, HARITA has scaled up from 200 enrolled households in one village in 2009 to over 13,000 enrolled households in 43 villages in 2011.

“It is wonderful to see this pilot working for farmers,” said David Satterthwaite, microinsurance program manager at Oxfam America.  “This is a great moment that comes on the heels of the announcement that we, with additional collaborators and support, will scale up the pilot over the next five years and expand into Senegal.”

The United Nations World Food Program (WFP) and Oxfam America, supported by the United States Agency for International Development (USAID) and Swiss Re respectively, have committed to expand HARITA, now known as the “R4 Rural Resilience Initiative" to help the rural poor to protect their crops and livelihoods from the impacts of climate variability and change, including drought. 

R4 will enable poor farmers to strengthen their food and income security by managing risks through a four-part approach—improving natural resource management (community risk reduction), accessing microcredit ("prudent" risk taking), gaining insurance coverage (risk transfer), and increasing savings (risk reserves).

Understanding protection
Russell Higginbotham adds: “We need to change the way we think about how protection is understood before we continue pushing the same old and rather tired propositions. Behavioural finance suggests that simple products would help consumers. People will not buy what they do not understand, but increasing understanding creates more confidence which will help people make more informed choices. Financial capability is about helping people understand their needs and giving them the tools to understand their options, enabling them to engage with and manage their finances better themselves.”

Notes to editors

The International Research Institute for Climate and Society
The International Research Institute for Climate and Society (IRI), part of the Earth Institute at Columbia University, aims to enhance society's ability to understand, anticipate and manage the impacts of climate in order to improve human welfare and the environment, especially in developing countries. From environmental monitoring and forecasting to climate-related risk management tools and practices in water resources, public health, agriculture, and food security, IRI and its partners focus on opportunities to build capacity for bringing climate information into regional planning and decision making. Follow @climatesociety on Twitter, or visit www.iri.columbia.edu.

Oxfam America
Oxfam America is an international relief and development organization that creates lasting solutions to poverty, hunger, and injustice. Together with individuals and local groups in more than 90 countries, Oxfam saves lives, helps people overcome poverty, and fights for social justice. To join our efforts or learn more, go to www.oxfamamerica.org.

Swiss Re
The Swiss Re Group is a leading wholesale provider of reinsurance, insurance and other insurance-based forms of risk transfer. Dealing direct and working through brokers, its global client base consists of insurance companies, mid-to-large-sized corporations and public sector clients. From standard products to tailor-made coverage across all lines of business, Swiss Re deploys its capital strength, expertise and innovation power to enable the risk taking upon which enterprise and progress in society depend. Founded in Zurich, Switzerland, in 1863, Swiss Re serves clients through a network of 56 offices globally and is rated "AA-" by Standard & Poor's, "A1" by Moody's and "A" by A.M. Best. Registered shares in the Swiss Re Group holding company, Swiss Re Ltd, are listed on the SIX Swiss Exchange and trade under the symbol SREN. For more information about Swiss Re Group, please visit: www.swissre.com.