AN £80,000 payout to Tearfund to protect smallholders during a drought in Malawi will help to prevent a hunger crisis, thanks to a new kind of insurance policy, the charity says.
Parametric insurance is paid out on the basis of “trigger” events, most commonly natural disasters such as earthquakes, floods, and droughts. The insurer makes a predefined payout for a specific event instead of assessing the actual loss. Payouts are much faster.
“We are preventing a hunger crisis before it takes hold,” Tearfund’s operations lead for Southern and East Africa, Elizabeth Myendo, said. “This insurance payout will pre-emptively support 1200 households with drought-tolerant crops (such as sweet potato vines and cowpeas) and high-value horticultural crops (such as tomatoes, auberginesm and onions). It is a key tool in tackling malnutrition.”
The payout was triggered after satellite-assessed soil-moisture levels fell below a certain threshold. The insurance seeks to provide financial relief for smallholding farmers whose yields would be at risk, and help them to be proactive in taking measures to improve food security.
Tearfund is working in partnership with the risk-management company Global Parametrics and the not-for-profit organisation Humanity Insured to provide the new source of financing, aimed at reducing the impact and cost of humanitarian crises. It is the first drought insurance payout to be made for smallholders in Malawi.
The choice of seedlings has been pre-agreed with the Malawian Ministry of Agriculture and agricultural experts, who advise on the best choices for farmers, given current market values.
“If the rains had not come at all, the insurance package could have also been positioned to provide emergency food supplies to help families through a period of extreme hunger,” Ms Myendo said.
“Teaming up with Global Parametrics and Humanity Insured enables us to ensure that the long-term work we are doing in partnership with local churches and communities around the world, helping people adapt to the effects of climate change, is better protected. The flexibility and varying levels of support the product offers means the people we work with will be more resilient to setbacks caused by extreme and unpredictable weather events.
“Tearfund, Global Parametrics and Humanity Insured, have together built this solution that will also be used in Nepal, Pakistan, and Ethiopia, as well as Malawi, focusing on protecting low-income families vulnerable to severe drought. We hope to go on to protect communities against excess rainfall, tropical storms, heatwaves, and other types of disaster, too.”
Tearfund’s country director for Pakistan, Jonathan Johnson, said: “It’s clear that the gap between the cost of global disasters and the finance available to respond to their impact is growing. People cannot depend on traditional models of aid, which can be slow to flow through to those at the sharp end when extreme weather events take hold. People at risk of extreme drought and famine must have fair access to insurance.”