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Satellite Data for Climate, Water and Food

FESA Micro-Insurance offers free drought insurance design

March 2013 - Aiming to serve all African farmers, FESA Micro-insurance is growing fast. But, large scale crop insurance puts special demands. Using automated insurance design and monitoring tools, EARS has developed a geo-information approach to crop insurance. Mapped insurance designs can be provided for the entire region, thus allowing for unrestricted sales. This enhanced capability is also reflected in the offer to develop proof-of-concept, free drought insurance design.  


FESA Micro-Insurance is a drought and excessive precipitation insurance system, developed by EARS Earth Environment Monitoring Ltd, a remote sensing and climate services provider in Delft, the Netherlands. The FESA initiative started in 2009 with financial support of the Ministry of Foreign Affairs in this country. The aim is to develop crop micro-insurance reaching every farmer in Africa. Drought risk analysis is based on more than 30 year of Meteosat relative evapotranspiration (RE) data. Scientific studies and FAO reports show RE to be proportional to crop growth. In this respect RE is considered a more suitable drought insurance index than precipitation.


2012 was a successful year. Drought insurance has developed for a dozen of projects in Mali, Burkina Faso, Benin, Kenya, Tanzania, Rwanda, Mozambique and Malawi. These projects were carried out in cooperation with PlaNet Guarantee and other micro-insurance partners. The number of actually insured farmers reached 23 thousand. This number is expected to double every year.


FESA drought insurance can be developed for every location in Africa without the need to have weather stations around. Therefore, there is a high potential to grow. EARS is currently confronted with the task to develop insurance for thousands of locations on the continent. The challenge has been addressed by developing more fully automated tools. This has resulted in a geo-information approach, where drought risk and insurance design parameters such as strike, exit and premium, are mapped for an entire region. In this way there is maximum spatial coverage and no limitation to selling the insurance product to farmers. This helps reaching a scale where crop drought insurance becomes financially sustainable and affordable to every farmer.


To demonstrate its enhanced capability, EARS is providing free drought insurance design for up to ten locations to relevant stakeholders. Interested parties must explain their interest and specify crop, sowing/planting window, length of growing season, as well as the name and decimal coordinates of the locations for which the insurance is to be developed.


Maize burning costs for the East African Region

The map presents the average payout for an insured maize crop in the period 1982-2012 for the long rains/masika growing season . Payout is determined on the basis of the growing season relative evapotranspiration (RE). Local agriculture is taken to be adapted to the long term average (REa). In this example, payout is linear, starts at RE=0.95*REa and reaches 100% if RE=0.65*REa. The term â€Å“burning costsâ€Â is often used for such a pay-out simulation. These represent the pure risk premium. The result, of course, depends on the design.

Satellite key to affordable drought insurance

September 2012 - FESA Micro-insurance has developed drought and excessive precipitation insurance using 30 year of Meteosat data. In 2012 the technology has reached considerable scale, insuring potentially several hundred thousands of farmers. A major step towards affordable crop insurance, which will help African farmers to invest in better seed and fertilizer and in this way realize higher crop production and income.


Increased food production requires African farmers to invest in better seeds, fertilizer and pesticides. In this way production and income may grow two or threefold. But most farmers don’t have the cash and need a loan for this purpose. MFI’s are reluctant to provide such loans, as crop failure due to drought or excessive precipitation would make redemption impossible. Micro-insurance is recognized as the key to this problem. It would enable African farmer to climb out of their poverty trap and start an upward spiral of increased income, savings and further investments.     


As the cost of traditional insurance is high, weather index insurance has been advocated as a solution. However, the number of weather stations in Africa is too low. Adding stations entails high costs and would not provide the historical time series needed for proper risk analysis.


In 2009, EARS Earth Environment Monitoring, a remote sensing company in the Netherlands, started FESA Micro-insurance with the aim to develop low cost, satellite based micro-insurance, reaching every farmer in Africa. To this end 30 year of Meteosat hourly images were processed to 10 daily Relative Evapotranspiration (RE) and Cold Cloud Duration (CCD) data fields. These data serve as insurance index of agricultural drought and excessive precipitation, respectively. They cover the entire African continent at a resolution of 3 km.


Since 2011 EARS is supporting insurance projects of PlaNet Guarantee, MicroEnsure, Syngenta Foundation and Cardano. Insurances have been developed for maize, wheat, rice, beans and cotton in Mali, Burkina Faso, Benin, Kenya, Tanzania and Rwanda.  EARS is providing for the data collection, risk analysis, technical insurance development, index monitoring and pay-out reporting. These services are readily implemented by the insurer.


Today this new approach to crop insurance has reached considerable scale. This is important so as  to keep overhead costs low. The project with partner PlaNet Guarantee in West Africa, involves already 840 locations. Each location may cover a farming community. In this way several hundred thousands of farmers can be insured. Yearly costs of data collection, index development and index monitoring would remain below 0.5 euro/farmer, a very small part of the insurance premium.  Therefore, FESA micro-insurance represents a major breakthrough towards affordable crop insurance. Everywhere in Africa!


Meteosat derived relative evaptranspiration (RE) is used as insurance index of agricultural drought. RE is closely related to plant available water and crop growth.


FESA Micro-insurance

The FESA project is one of the Milennium projects of the Dutch Minister of Development Cooperation. The objective of the project is to develop a Meteosat based drought micro-insurance system that can reach every farmer in Africa. Partners in the project are MicroEnsure , RABO Development and Ecorys.

The FESA approach is based on 30 years of hourly Meteosat data, which have been processed to climatic data products, in particular temperature, radiation and evapotranspiration. These are then used to generate crop yield estimates or indices and to derive the necessary drought probability statistics for every location on a 3 km grid. The indicators used for drought and crop failure are the growing season relative evapotranspiration (RE) and relative yield (RY).

The first phase of the project has been completed. This phase adressed data base development, data validation and elements of insurance design. A comparative burn-study was carried out for 29 locations in Tanzania, using ground measured precipitation and satellite derived evapotranspiration respectively. The study has revealed great opportunities for reducing basis risk, scaling up and cost reduction. 

The results have been consolidated in the printed report "FESA Micro-insurance: methodology, validation, contract design". The report price is 150 euro. It can be ordered by sending us an email through our ordering page. Please write "FESA report" in the first line. Complete ordering form.