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Farm aid from space

Satellite data of climate activity enable remote herders to obtain drought insurance.

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But rainfall or vegetation data are objectively verifiable, reducing if not eliminating the possibility of cheating.

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Weather-index insurance has its own challenges. One of the biggest is designing a policy people will buy; most insurance programs for crops have premiums ranging from $2 to $10. In pilot programs in Tanzania, Malawi, Ethiopia, Rwanda, India, and other countries, varying partnerships of governments, nonprofits, academics, and insurance companies have been working on creating insurance packages that are comprehensible and attractive to rural farmers or herders.

ILRI created a game to illustrate the benefits of insurance to the Kenyan herders they hoped would become customers. The herders appreciated the idea, but they wanted to know where this objectively available data came from.

"You imagine that satellites are quite a foreign concept," says Mude. But one of his trainers made a key analogy. "These are populations who understand the stars very well, who use the stars to help them guide their movements and so on. And so they are very aware that there are stars that move around at night – what they call 'stars,' in quotes – that are different from permanent stars. We let them know these moving stars are satellites taking pictures."

Counting raindrops vs. days of drought

In a pilot crop insurance program in Rwanda, the lessons went the other way. MicroEnsure, a company specializing in insurance products for the poor, created a rainfall-based insurance program for Rwandan tomato farmers. If it failed to rain a certain amount in January, February, or March, the farmers would get a payout. The amount changed every month, depending on how much rain agricultural scientists felt a tomato crop would need at that point in its growth cycle.

But the measurement system isn't perfect. It might rain in just two days the 100-milliliter minimum for all of January. The next 29 consecutive days without precipitation would likely kill the plants, but no payout would be made, since the rain threshold had been met. This was a problem the farmers recognized immediately, says Shadrek Mapfumo, vice president of agriculture insurance at MicroEnsure.

"The farmers told us, 'Why don't you look at how many days there have been with no rain?' " he says. "That's the kind of insurance they will be expecting when you are covering them against the risk of prolonged dryness."

If Africa is a land of lessons, India has been the laboratory for applying them. When MicroEnsure experimented with a policy based on the number of dry days, rather than monthly minimum rainfall, the demand for insurance in one town increased sixfold, from 4,000 customers to 25,000.

India is also the first place where weather-index insurance has looked to be more than a promising experiment.

"India has become a commercial market," says Juerg Trueb, a managing director in charge of environmental and commodities markets at reinsurance giant Swiss Re. The company's India premiums have grown from "a few hundred thousand dollars in 2004 to $100 million" expected this year, he says.

Meanwhile, the policies might help farmers fend off poverty. Crops insured against loss can be used as collateral for loans, and loans can be used to buy better seeds or invest in equipment. A combination insurance and loan pro-gram in Malawi helped MicroEnsure's clients increase yields by up to 200 percent, says Mr. Mapfumo.

"Because of that, we found that some of them were even able to buy new assets," he says. "One of our clients, the year before we had him, he was living in a mud house. The following year, he was able to build a structure with a corrugated iron roof. It really remade his life."

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