Can Drought Insurance Improve Humanitarian Relief?
July 26, 2006
Ethiopia desert near Lake Langano. Photo by Niklas Schiffler, 2005. Creative Commons usage license.
The United Nations World Food Programme (WFP) is running a pilot initiative wherein it has taken out an insurance policy on the chances of drought in Ethiopia during the 2006 agricultural season (March to October). The contract with AXA Re stipulates that if certain rainfall indices are triggered then emergency relief funding will be paid. The triggers are set such that funds can be mobilized before famine sets in and the assets of a least developed country like Ethiopia become depleted. This experiment in ex ante risk management has the intention of both reducing short-term destitution and ensuring the timely and efficient delivery of humanitarian relief. Read the Pilot Development Project that was up for approval before the WFP's Executive Board.
