Flooding, drought cost US$35M annually from 1988-2006

Jun 23, 2010 News

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– collaboration best approach to farmers’ insurance

Even though a recent key meeting in Antigua on farmers’ insurance has recognized the enormous challenges in implementation of any plan, the Guyana government says all is not lost and a public/private partnership may be the best solution.
Any system involving agricultural insurance in Guyana must be effective, efficient and sustainable in the long term and the exact details of this partnership are currently being examined, says Minister of Agriculture, Robert Persaud.
The three-day symposium, which ended in Antigua and Barbuda on Friday last, was coordinated by the Caribbean Community (CARICOM) Secretariat, the Ministry of Agriculture of Antigua and Barbuda and the Inter-American Institute for Cooperation on Agriculture (IICA).
The World Bank, Caribbean Development Bank (CDB), Food and Agriculture Organisation (FAO) of the United Nations, the Caribbean Disaster Emergency Management Agency (CDEMA) and Government of Australia Aid Programme also supported the event.
The issue of crop insurance has been taking the front burner recently with increasing calls for mechanisms to ensure that the agricultural industry is protected a little more.
However, insurance companies, in Guyana and the region are reluctant to provide coverage to an area which they consider high risk.
Between 1988 and 2006, Guyana has recorded annual losses due to flood and drought at an average of US$35M.
“These events can put a tremendous amount of pressure on Guyana’s productive capacity, its economic stability, its budgetary planning systems and compromise food security both regionally and nationally. Furthermore, they have the frightening power to reverse any gains on poverty reduction which is predominantly concentrated in Guyana’s rural areas, where agriculture is the main source of income,” Persaud said in a message to the Antigua meeting.
The meeting had concluded that some farmers’ insurance in Guyana and the Caribbean may just not be possible.
Insurance companies may have to modify or customise their policies to fit particular situations, experts say.
Targeting the role of the private sector in agricultural insurance in the Caribbean, the team of experts from the World Bank comprising Carlos Enrique Arce, Senior Economist; Vikas Choudhary, Agricultural Specialist; and Pablo Valdivia presented experiences of working models for agricultural insurance and risk assessment as managed by the Bank.
“We have to be able to adequately analyse, prioritise and manage the risks.  Effective risk management can lead to sustained competitiveness of the actors along the chain,” Choudhary concluded.
Arce gave an overview and genesis of WII – a concept borrowed from energy sector of the USA and adapted to agriculture.
He noted that the process is very complex to apply and is still a work in progress.
“This type of insurance can be applied at the meso and macro levels and huge technical and financial support is required for its implementation,” he said.
In addressing the applicability of Index-based Insurance for the Caribbean, Arce advised that it is suitable for drought, yet more challenging for sudden risk events such as hurricanes, which are frequent within the region.
In the particular case of the Caribbean there may also be challenges involved in dealing with such a large number of independent farmers, a large variety of crops and many short cycle crops which are complex to model.
Rounding off the presentations from the Bank on the private sector perspectives on agricultural insurance, Valdivia shared an in-depth look at the case of agricultural insurance for crop and livestock farmers in St. Elizabeth and Portland parishes in Jamaica.
Multiple risks and exposure to varied weather patterns impact crop production.  Additionally, susceptibility to weather risks and to pest and diseases vary between crops and even within the same crop.
Valdivia concluded that in addition to small farmers’ risks being very challenging, agricultural insurance does not fit all and there are some risks that are not insurable.
Essentially, a combination of mitigation, transfer and coping is needed to deal with agriculture risk management in the Caribbean, the official said.
According to Persaud in his statement, “agriculture is disproportionately vulnerable to natural disasters caused by hurricanes, earthquakes and El Nino and La Nina conditions. And with the onset of climate change, we will experience further sea level rises, changing precipitation patterns, ocean acidification, and more extreme weather events in the Caribbean region, which are all likely to negatively affect our agriculture sectors and thus have a significant impact on the Region’s Food Security. The Jagdeo Initiative has therefore rightly recognized that we need to do more as a region to coordinate and strengthen our risk management measures.”
Agriculture is the most important economic sector in Guyana, accounting for approximately 50% of employment, 30% of GDP and 40% of export earnings.
According to Persaud, Guyana, in partnership with the private sector, NGOs and the international donor community, has developed a three-pronged approach aimed at mitigating risks through agricultural diversification, minimizing damages through improvements in early warning systems and exploring risk transfer options, such as agricultural insurance, which are feasible in the Guyana context.
“It is hoped that this approach will assist the sector in achieving its true potential; that is, being a competitive, dynamic, sustainable and resilient sector, capable of supporting its people and the world more widely in their right to food security.”
However, Persaud acknowledged, Guyana still has a long way to go before it can safely say that it has been able to shield its agricultural sector from the risks it faces.
“Despite the massive amounts of financing that have already been spent and committed to the sector, significantly more investment will need to be pumped into all of the areas outlined above and a number of additional initiatives will need to be taken, which such as in the case of agricultural insurance, are not always as straightforward as they may seem at first glance.”
He acknowledged that there are no quick fixes in agriculture and any increase in resilience in the agricultural sector requires a massive amount of efforts by all the stakeholders involved.

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