Journal Article

IDS Bulletin Vol. 39 Nos. 4

Climate Insurance for the Poor: Challenges for Targeting and Participation

Published on 1 September 2008

A growing body of evidence indicates that climate change is set to increase the frequency and intensity of natural hazards (IPCC 2007).

A recent United Nations report (2007) asserts that global hydrometeorological hazards, such as droughts, floods and hurricanes, have increased by 87 per cent over the last 20 years. Those most affected by this trend are the world’s poor. Poor people in developing countries are the most exposed to natural hazards, as in most cases they have to manage weather risks by their own means and have limited or no access to insurance and financial services to help them recover from crises (Syroka and Wilcox 2006).

In sub-Saharan Africa about 140 million people live with the constant threat of droughts or floods. Prevailing uncertainty and the absence of financial safety nets makes it difficult for poor farmers to make higher-risk, higher-return investments. Then, when the rains fail, vulnerable households act fast. Immediate response strategies include selling nonproductive assets or migration of family members. However, if the situation does not improve, they are forced to use more costly coping strategies, like removing children from school, reducing food consumption and health expenditures, and selling productive assets, such as farming tools and livestock (Barnett et al. 2006; Hess et al. 2006).

By the time humanitarian aid reaches the poor, the majority have already lost key assets and livelihoods, and therefore their ability to benefit from better weather the following year (WFP 2006). According to the World Bank and the World Food Programme (WFP) this response ‘delay’ under an ex post emergency model, accounts for large numbers of new destitute people after a climate-related disaster. After losing their productive assets, these newly poor are often trapped in a state of dependency on external aid for many years (Hess et al. 2006; Morris 2005), and risk moving from temporary poverty to being chronically poor.

In this scenario, humanitarian assumptions have started to be questioned: are our response mechanisms working or will the reinforcement of old practices become a risk for the poor? Do we need to find a more effective and sustainable way to approach weather risk and humanitarian assistance? In response to these questions, innovative models are now being considered and tested (Pelling 2007).

This article looks at weather insurance schemes recently piloted at the micro- and macro-levels, and assesses their potential as tools for social protection. It highlights the challenges of and differences between the two approaches, and looks at the opportunities for improved targeting and local participation.

Key findings are that weather-based microinsurance ultimately targets relatively better off farmers and is not an appropriate tool for broad social protection targeting all poor groups. Macroinsurance policies in support of existing social protection programmes appear to have more potential in reaching the most vulnerable. By providing timely and predictable aid after a severe drought, disaster insurance can have an important role in saving the livelihoods of transiently food-insecure people.

Related Content

This article comes from the IDS Bulletin 39.4 (2008) Climate Insurance for the Poor: Challenges for Targeting and Participation

Cite this publication

Pierro, R. and Desai, B. (2008) Climate Insurance for the Poor: Challenges for Targeting and Participation. IDS Bulletin 39(4): 123-129

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Rachele Pierro

Bina Desai

Publication details

published by
Institute of Development Studies