Why poor farmers need insurance against climate disasters

Investing in insurance programmes for poor farmers today could save tens of billions of dollars in coming decades as climate change upsets growing patterns and makes harvests fail, U.N. officials said ahead of next week’s conference in Japan on disaster preparedness.

An investment of $350,000 in disaster prevention for farmers, including irrigation systems, crop insurance and terraces saves an estimated $4 million in averted costs for humanitarian relief when a drought or flood hits, said Richard Choularton, chief of disaster risk reduction at the World Food Programme (WFP).

Index insurance systems, where farmers receive a payout if rainfall levels or the temperature pass a given threshold, have been some of the most effective tools in helping communities respond to floods, droughts or heatwaves, Choularton said.

“The poorest farmers are the ones who need access to insurance most,” Choularton told the Thomson Reuters Foundation. “Safety nets are needed to reduce and manage the risks from disasters.”

A U.N. report released ahead of the Third World Conference on Disaster Risk Reduction set to take place in Sendai, Japan, from March 14-18 found that disasters are expected to cost the global community up to $300 billion in annual losses in the coming decades.

Choularton believes that estimate is conservative.

The scale of the problem is making governments start to appreciate the increased costs they can expect when natural disasters strike.

The African Union, for example, has set up an insurance fund to help member states when a drought hits, and individual countries are also building their own programmes, Choularton said.

On average, the farm sector bears 22 percent of the costs caused by natural disasters, said Dominique Burgeon, director of emergencies for the Food and Agriculture Organization (FAO).

“The number of disasters is increasing, becoming more intense and more costly,” Burgeon told the Thomson Reuters Foundation. “Climate change is increasing the frequency and intensity of extreme weather, especially floods, droughts and heatwaves.”

Around the world, 2.5 billion smallholder farmers depend on agriculture to earn a living, he said, including hundreds of millions who exist at subsistence levels at the best of times.

In the developed world, about 80 percent of agricultural insurance is subsidized by the state, the WFP’s Choularton said, and governments in developing countries should work to expand social safety nets for farmers to mitigate the worst effects of disasters.

This article is published in collaboration with Thomson Reuters Foundation. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Chris Arsenault covers global food security and agricultural politics for the Thomson Reuters Foundation.

Image: Residents use an improvised craft made from liquefied petroleum gas tanks to take passengers to their homes down a flooded street after Tropical Storm Fung-Wong battered Cainta, Rizal province, east of Manila. REUTERS/Romeo Ranoco