Rescaling index insurance for climate and development in Africa

Abstract

This paper chronicles 15 years of experimentation with index insurance as a technology of weather risk governance, particularly as applied to vulnerable agricultural populations in sub-Saharan Africa. Index insurance – in which payouts are determined by environmental variables rather than direct loss inspection – has become a preeminent method with which development actors propose to manage climate vulnerability, despite problems of low demand and inaccurate loss indemnification. These challenges have prompted expert revisioning of the appropriate agents, risks and pools for index-based cover. Contrary to neoliberal individualization, indices have recently been used to constitute broader scales for welfare and humanitarian interventions. Yet, difficulties at even the largest-scaled pool suggest the impossibility of democratizing risk without transforming the terms on which the global adversely selected are offered coverage.

Keywords:

• risk pools
• scale
• basis risk
• index insurance
• climate risk

Acknowledgements

Thanks are foremost due to the interviewees who shared their time and insights with me and the development practitioners who allowed me into their worlds. I am especially grateful to the IBLI team at ILRI in Nairobi. Thanks to Rebecca Elliott, Turo-Kimmo Lehtonen and Stephen Collier for organizing the special issue and commenting thoughtfully throughout. Sara Aguiton, Brett Christophers, Stefan Ouma, Zac Taylor and two astute reviewers at Economy and Society gave invaluable feedback on earlier versions of this paper. This research was supported by the Swedish Research Council project grant, ‘Climate Change and Transformations of Financial Risk’ (#2015-01694).

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 Particularly the World Bank, World Food Programme, the British, German, American, and Swiss development agencies, and the Rockefeller Foundation.

2 On microinsurance, see eg Aguiton, 2019; Da Costa, 2013; Johnson et al., 2019; Knudson, 2018; Peterson, 2012; Posada, 2016; Sheth, 2017; Taylor, 2016. There are very few studies of macro-level initiatives (Grove, 2012; Lobo-Guerrero, 2010).

3 Following Tania Li’s (2007) recognition of ‘the will to improve’ in development schemes.

4 The largest was in India; others included Malawi, Ethiopia, Mongolia, Peru and Ukraine.

5 GIIF supported Syngenta Foundation in Kenya and Rwanda; PlaNet Guarantee in Senegal, Burkina Faso, Mali, Niger, Benin and Togo; MicroEnsure in Rwanda; Guy Carpenter in Mozambique; ILRI in Kenya, and MiCRO in Haiti.

6 FCCC/CP/2007/6/Add.1, Decision 1, CP.13.

7 FCCC/CP/2015/10/Add.1, Article 8 para 4

8 Accessible at http://unfccc-clearinghouse.org/

9 Author interview, September 2015.

10 The author attended the roundtable event, which was subject to Chatham House rules prohibiting disclosure of participants’ identities or affiliations.

11 Author interview, September 2017.

12 Johnson et al. (2019) provide an extensive account of project history, difficulties, sales and payouts.

13 The survey includes more than 900 households visited over six years.

14 Author interview, July 2015.

15 Author interview, September 2015.

16 See Knudson, 2018 for reflection on one of InsuResilience’s championed direct microinsurance models.

17 Data on KLIP is the result of the author’s ongoing research conducted since 2015.

18 The payment is discussed in COP meeting notes and was confirmed in interviews with reinsurers, July 2018.

19 Personal communication, ARC representative, September 2019.

Additional information

Notes on contributors

Leigh Johnson

Leigh Johnson is Assistant Professor of Geography at the University of Oregon. She is an economic geographer and political ecologist focusing on attempts to govern climate and disaster risks through market-based tools, particularly insurance and financial instruments.