Kenya: More actions needed to make weather index-based insurance work, says IRA

May 28, 2015

The Kenyan regulator believes challenges are caused by limited data at local weather stations.

Difficulties in implementing weather index-based cover are preventing insurance companies from accurately compensating Kenyan farmers for losses due to adverse weather, the Insurance Regulatory Authority (IRA) has said.

The Kenyan regulator believes challenges are caused by limited data and lack of integrity at local weather stations, lack of capacity in the industry, poor understanding of the product among insurance employees, expected payout frequency of policy and limited product designs currently in the market.

"It is often used in agriculture to protect farmers from weather events measured at a local weather station for instance, if rainfall measure at the station is less than a threshold, all farmers within certain radius of the station will receive a payout, irrespective of the rainfall on their farm," said Joseph Owuor of IRA, quoted by The Star.

The World Bank has been actively encouraging weather index-based insurance because it uses a weather index, such as rainfall, to determine payouts and these can be made more quickly and with less argument than is typical for conventional crop insurance.

But there are concerns surrounding the risk that a farmer experiences a poor crop yield, but the data provided by the weather station does not trigger a claims payout.

Joseph Owuor said under weather-index based insurance, assessment of the farm or field is normally costly or deemed not feasible, particularly where there are a large number of small-scale farmers.

He added the authority is coming up with regulations to guide the policy and to correlate better the findings from weather stations with the reality of what is happening in the field.ADNFCR-2976-ID-801788982-ADNFCR