Awareness raising on weather insurance in Mumbwa, Zambia
India/Zambia/Paraguay/Madagascar: Cooperation in action

Development of insurance markets

As part of the InsuResilience Global Partnership, the German Development Ministry supports activities to develop insurance markets in India, Zambia, Paraguay and Madagascar.


A project in India supported under the InsuResilience Global Partnership seeks to make the market more sustainable through the introduction of innovative climate risk insurance. In this context, "innovative" means that insurance becomes more affordable and accessible for poor and vulnerable people. The target group consists mainly of farmers, labourers and owners of small businesses. It is planned to broaden the target group step by step. The project will expand the protection provided by insurance so far, and introduce new technologies.

Activities in India address two main aspects. First, there is a focus on offering insurance against natural disasters. By using parametric methods, insurance is to be provided in rural areas for floods, droughts, cyclones and earthquakes. This natural disaster insurance is to be linked to group loans and will be sold through microfinance institutions. Potential clients of such combined products are farmers, labourers and owners of small businesses. The products are expected to provide quick financial assistance to borrowers when a natural disaster hits, so as to prevent people from resorting to negative coping strategies, or at least reduce the number of instances in which that happens. Negative coping strategies include using up all one's savings, selling assets such as livestock, and borrowing from informal lenders at exorbitant interest rates.

The second aspect is the conceptual development of satellite-based flood index insurance. Some initial efforts to map flood events based on free satellite data (for instance from the earth monitoring satellites Sentinel-1 and Sentinel-2) have been carried out jointly with the German Aerospace Center (DLR). Efforts are also under way to develop an automated flood detection system as a basis for the payment of insurance benefits. Satellite-based flood index insurance enables low-income and vulnerable households in developing and emerging economies to get more affordable and comprehensive protection against income loss.


In Zambia, more than 53 per cent of the workforce work in the agricultural sector. Most of them are smallholders with less than five hectares of land who have few resources to hedge production risks. Weather events such as a rainy season that starts late, periods of drought, inadequate and irregular rain, but also excessive rain can lead to high crop losses.

Weather insurance can help them to reduce these risks and increase their resilience. This is addressed by a project supported under the InsuResilience Global Partnership which fosters the sustainable development of the agricultural insurance market in Zambia.

Since the 2013–14 season, NWK Agri-Services, a cotton company, has been offering index-based weather insurance based on satellite data to cover dry periods, droughts and heavy rains.

This voluntary insurance scheme does not rely on subsidies for premiums. Under a contract farming model, NWK advances the premiums for the smallholders, together with other agricultural inputs such as seeds and fertiliser.

The farmers, in turn, make a commitment to sell their cotton to NWK at the end of the season. Their earnings from the sale of the cotton and the potential disbursements from the weather insurance are used to pay off the loan. Any surpluses are paid out directly to the farmers.

The insurance scheme can give small farms the security and confidence to make more investments. This translates into bigger volumes of cotton that companies such as NWK can buy, thus also strengthening the company's business model.

Since 2016, the BMZ has been financing activities in Zambia geared towards strengthening demand and supply in the climate risk insurance market. Insurance companies such as Mayfair and Hollard and agricultural companies such as NWK and Alliance Ginneries receive assistance as they develop sustainable climate risk insurance schemes. In addition, NWK entered into a three-year development partnership under the BMZ's programme in June 2018.

Between 2013–14 and 2018–19, 84,000 such insurance contracts were concluded with NWK and other agricultural enterprises. During the last major drought in 2016, some 23,000 beneficiaries received payments. In addition, Alliance Ginneries concluded a portfolio weather insurance contract for the 2018–19 season to cover 20,000 hectares of land that are farmed by 18,000 small farmers on the basis of contract farming for Alliance Ginneries.

On the supply side, capacity is being built at local insurance companies so that more of them are able to offer weather insurance for small farms. This is done through workshops and the provision of targeted advice on product development. Two local insurance companies are planning to start offering weather insurance in the 2019–20 season.

Efforts have also been undertaken to strengthen understanding of agricultural insurance on the demand side. Farmers receive training on agricultural insurance. Information is also provided through posters and flyers and via mobile phones.

A man on a field in Paraguay with manioc roots


Agriculture is one of the most important sectors of the economy for Paraguay's approximately seven million people. It accounts for about 26 per cent of gross domestic product and employs some 40 per cent of the people. Nearly one third of the country's poor people live in rural areas. They are increasingly confronted with the consequences of climate change. According to the international EM-DAT disasters database, floods, storms and droughts are the most frequent extreme weather events in Paraguay – and their frequency is increasing, as is the damage they cause.

In order to enhance rural people's resilience to disasters, Germany has been supporting the FortaleceRES project through its development cooperation since 2016. The project focuses on developing agricultural, climate and life insurance products in eastern Paraguay. It targets primarily small farms, which are often run by women.

Under the project, the country's public agricultural bank (Crédito Agrícola de Habilitación, CAH) is developing index-based weather insurance for its loan clients. If an extreme weather event occurs, they receive payments which enable them to respond more quickly and effectively to a disaster.

Another key partner for the project is the social affairs secretariat (Secretaría de Acción Social, SAS). It is planning to provide the 13,000 beneficiaries of a life and disability insurance programme with a disaster insurance that would also protect them against heavy rains and extreme drought. And the ministry of agriculture and animal husbandry (Ministerio de Agricultura y Ganadería) and the national insurance supervisory authority (Superintendencia de Seguros) are receiving advice on various forms of agricultural insurance.

The PROCADENAS project, which is being co-financed by the EU, is a cooperative endeavour of the BMZ and the Paraguayan animal husbandry ministry (Viceministerio de Ganadería, VMG) to foster diversified, sustainable small livestock production. The purpose of this effort is to strengthen various small livestock value chains, such as beekeeping, the keeping of goats and sheep, and fish farming. This is to be achieved, among other things, through improved risk management.

The first results of risk analyses that have been carried out show that health hazards such as animal diseases, climate risks (especially droughts and freezes) and market risks such as price fluctuations and smuggling have a negative impact on value chains. On the basis of these findings, sustainable insurance solutions and financial products are being developed for producers and other players along the value chains.

Insurance is an instrument that facilitates risk transfer. This means that it can make investment in a given value chain more sustainable. It helps small producers to respond better and more quickly to disasters. Generally, insurance thus contributes to the development of resilient value chains. Further aspects addressed by the project include the promotion of sustainable production methods, integration in national and international markets, and promotion of a stronger dialogue between the public and private sectors.

FortaleceRES and PROCADENAS thus contribute towards expanding the InsuResilience Global Partnership, which was launched at COP23 in Bonn in 2017 and has the aim of insuring, by 2020, an additional 400 million poor and particularly vulnerable people in developing countries against climate risks.


Due to its geographical location and its people's dependency on natural resources, Madagascar is very vulnerable to the impacts of climate change. The agricultural sector, the country's most important industry, is particular affected. Agriculture is also a major source of livelihood for most of the country's poor.

Within the framework of the InsuResilience Global Partnership, PrAda, a project for the adaptation of agricultural value chains to climate change, began to provide support to the dissemination of climate risk insurance in early 2018. This helps players along value chains to protect themselves against income loss from climate- and weather-related events.

Innovative climate risk insurance products are being developed in three southern regions – Androy, Anosy and Atsimo-Atsinanana. The main partners of the project are the agriculture ministry of Madagascar (Ministère de l'Agriculture et de l'Elevage) and insurance regulators and national insurance companies.

The cooperation between the InsuResilience Global Partnership and PrAda focuses on providing expertise in support of the key stages of project delivery in Madagascar, supporting capacity development with regard to insurance market development and index-based insurance, and disseminating the findings of the project internationally.

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