Ten of the worlds largest reinsurance companies have been invited to tender for a bold pilot scheme to insure Ethiopia against drought, reports the World Bank press review Monday.
The UN World Food Program (WFP) has approached insurance companies using an index based on Ethiopian rainfall patterns in some of its most vulnerable areas. While not perfect, it reckons the index can predict losses of household income with 85 percent accuracy.
Assuming the project goes ahead, WFP will pay a yearly premium to the chosen insurer. If rainfall is less than certain levels, the insurer will pay out 15 to 20 million US dollar. That money would provide an important source of funds before people start suffering. The project marks a significant first step towards introducing modern risk management techniques to the aid industry.
“Donors are de facto reinsurers,” says Richard Wilcox, WFPs director of business planning, “and intelligent reinsurers manage their risk.” On the other side of the coin, he says, business people are interested in diversifying their portfolios in response to changing world weather patterns.
It is still unclear, however, what it will all cost. Some fear the industry will charge exorbitant prices. Donors have been understandably cautious. There are concerns at giving aid money to the insurance industry.
Nevertheless, the US has offered to pay 50 percent of the pilot project costs, and the WFP hopes to win more commitments by the end of the month, when the tenders are due. Wilcox concedes the project is something of an experiment, and he cannot predict the outcome. But “it is well worth trying. The system as it is now is not acceptable,” he says.
Meanwhile, Jean Ziegler, the UN special reporter on the right to food, said Friday that every day some 100.000 people die of malnutrition. – The right to food is a human right, stated the special reporter, who will present his full report to the UN in New York on October 27.
The chronic lack of food in Sub-Saharan Africa was particularly worrying, with over a third of the regions population now considered malnourished, with numbers of underfed soaring from 88 million 1999 to 200 million in 2001.
While the 191 countries in the UN spent 1 trillion US dollar on arms in 2004, they reduced their donations to international organizations, Ziegler complained. This year, the coffers of the WFP were 219 million dollar down, while the UN High Commissioner for Refugees needed an extra 182 million dollar to run his operations properly, according to Ziegler.
The WFP has had to reduce food rations for thousands of refugees over the past few months, particularly in West Africa and the East African Great Lakes region, to well below the 2.100 calories needed for survival.
Kilde: www.worldbank.org
