Weather Risk Insurance for Agriculture:Weather Risk Insurance for Agriculture:A Special SymposiumA Special Symposium

M.V.K. M.V.K. SivakumarSivakumarAgricultural Meteorology DivisionAgricultural Meteorology Division

WMO WMO

Weather Risk and AgricultureWeather Risk and AgricultureWeather Risk and Agriculture

• Agriculture is the most weather-dependent sector

• Rainfed farming remains a risky business

• Natural disasters have a devastating effect on agricultural production

• Extreme climate variability carries multi-dimensional impacts

Agriculture – The Most Weather Dependent Sector

• Agriculture is an important sector for the economies of many developing countries and employs 60% of the workforce in India, 50% in China, 23% in Brazil, and 70% in Nigeria.

• Most of the countries produce cash crops such as wheat, rice, coffee, bananas, cotton, sugarcane etc., for export while subsistence farmers grow a range of crops for their household consumption and for the local market.

Rainfed Farming Remains a Risky Business

• As much as 80% of the variability in agricultural production is due to the variability in weather conditions

• In India, 65 percent of the total cropped land is rain dependent and hence subjected to vagaries of monsoon.

• Failure of rains and occurrence of natural disasters such as floods and droughts could lead to crop failures, food insecurity, famine, loss of property and life, mass migration, and negative national economic growth.

Natural Disasters and AgricultureNatural Disasters and Agriculture

• Climate variability and the severe weather events that are responsible for natural disasters impact the socio-economic development of many nations

• Annual economic costs related to natural disasters estimated at about US$ 50–100 billion.

Rainfed Agricultureshould be renamed

Risk Management Agriculture

CLIMATE FAILURE = PERSONAL FAILURE ?

• Poor farmers at the subsistence level have very little cash incomes and most of their input investments, especially for crop protection, come through loans at high interest rates.

• When there is crop failure due to high climatic variability such as droughts, the poor farmers loose their entire investment.

• At these times, some farmers take it as personal failure driving some of them to suicides.

• While there are clearly socio-economic factors at play here, there is also a clear linkage between climatic risk and personal psychology.

• This points to a clear need for more effective climatic risk management in vulnerable social environments and human psychology.

CLIMATE FAILURE = PERSONAL FAILURE ?

Disaster Risk Management Involves a Wide Range of Decisions and Actions

Risk TransferRisk Identification Risk Reduction

Disaster Risk Management

→ Historical impacts of disasters

→ Changing trends

→ Vulnerability assessment

→ Risk factors

→ Risk quantification

→ Sectoral planning (short to long term)

→ Early Warning Systems

→ Preparedness planning

→ Education and training

→ Financial tools• Insurance• Weather derivatives• Cat bonds

Need for Partnerships and Coordination Among Different Players (Private, Public, Academia) Involved in Disaster

and Climate Risk Management

Governance, Organizational, Operational Issues

Financial(Risk Transfer)

Civil Protection & Humanitarian

(Emergency Preparedness and Response)

Sectoral PlanningScientific, Technical,

Research, Operational Services

(Hazard Observing & Forecasting, Risk Identification)

Media(Communication)

World Meteorological Organization

133 years of 133 years of international and regional international and regional

cooperation in support of national cooperation in support of national capacities for meteorological, capacities for meteorological,

climate and hydrological services climate and hydrological services for sociofor socio--economic developmenteconomic development

WMO Initiatives in Support of Weather Risk Market Development ….

• Advocacy at the ministerial level of the importance of meteorological and hydrological observing networks

• Working with the weather risk market to identify needs and requirements for hydro-meteorological products and services

• Technical capacity development of National Meteorological and Hydrological Services for providing relevant data and forecast products and services to this market

• Working with international partners on pilot projects in different countries

• Development of meteorological and hydrological standard indices (such as drought) that can be used in this market.

WMO Global Operational Network in Support of Multi-Hazard Early Warning Systems

WMO’s Global Data Processing and Forecasting Centres

Providing technical support for analysis and forecasting (short to long term) to developing Countries

Contributions of the National Meteorological and Hydrological Services to the Design and Settlement

of Financial Risk Transfer Contracts

• Availability and accessibility of historical meteorological and hydrological data

• Technical support for data homogenization and analysis

• Reliable governmental authoritative data for contract settlement

• Forecasts and warnings for management of risk portfolios

Contribution of National Meteorological and Hydrological Services to Risk Transfer

– Crop / flood insurance– Agricultural and

drought derivativesInsurance

Weather derivatives

Catastrophe bonds

Government

Private sector

– Insurance for property and casualties

– Micro-insurance– Weather derivatives– Catastrophe bonds for

hurricanes

exampleproducts provider

Thank you very much for your attention