A micro-insurance and index-insurance scheme has been launched at the World Economic Forum in Davos by Imperial academics who claim it will save the food supply chain billions of dollars per year and create large-scale demand for risk transfer to re/insurance.
The scheme, WINnERS project, consists of an infrastructure that gives the most at-risk farmers insurance against crop loss caused by weather hazards and climate change.
The ambitious scheme’s pilot project will launch in Tanzania with some 50,000 newly insured farmers and it aims to expand throughout Sub-Saharan Africa by 2020 – securing smallholder farmers by providing access to financial aid from investment capital.
Professor Sir Gordon Conway, Senior Advisor to the WINnERS Project and Chair in International Development at Imperial College London said; “A significant aim of WINnERS is to create a sustainable and commercially viable system to protect these farmers against the uncontrollable impact of global warming through increased farm productivity, financing and revenues across the supply chain.”
The scheme is expected to increase maize yields to the extent that it would raise the average GDP across Sub-Saharan Africa by nearly 3 percent.
Commenting on the WINnERS project, Dr Enrico Biffis, Associate Professor of Actuarial Finance, Imperial College Business School, said; “properly designed risk solutions such as crop loss insurance can provide a powerful mechanism to incentivise smallholder farmers to adopt more resilient production technologies.
“These in turn reduce insurance costs and attract cheaper investment capital. Big data allows us to upscale insurance at an unprecedented level, and has the potential to generate a systemic shift in food systems.”
If successful, the WINnERS project could have a far-reaching impact; opening the $50 billion crop production opportunity for world food markets represented by the quarter of a billion farmers not currently integrated into commercial supply chains, increasing the profit of smallholder African farmers, and mitigating against climate change through risk transfer to re/insurance.
At the moment, while the WINnERS scheme gains scale, the need for reinsurance capacity to back it will be minimal. However, in future as premiums from index-insurance increase the reinsurance market will be required to provide support as such schemes grow.