Index based Weather Insurance
What is covered ?Crop damage as a result of deficit or excesses in weather conditions such as temperature, sunlight, wind speed or rainfall resulting in losses for the Insured during the length of the crop growth cycle up to physiological maturity.
Crop covered
Any crop whose production is affected by weather.
How it works
- Weather measurements are taken at the reference automated weather station whose reading represents similar weather in the farmer’s farm where the insured crop is growing.
The most common index based weather insurance product in Kenya is for excess rainfall or drought.
- Rainfall is measured throughout the season at the farmer’s nearest representative weather station as identified to the farmer at time of purchase.
- Insurance can be sold to both self financed or financed (seasonal credit) farmers with premium financing arranged by bank.
- The coverage starts when the rainfall received is adequate for planting as within the planting window and ends when the crop is physiologically mature.
- Possible payouts are multiphased corresponding to each phase of the length of the crop growth cycle up to physiological maturity.
- The insurance payout amount is calculated using a formula that is specified in the insurance contract and made automatically if rainfall amounts are below or above given levels.
- To get the product you must pay a premium to the insurance company:
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- Premiums can be included as part of the loan package or paid in cash
- Premiums are not refundable if there is no payout.
- No matter what happens you must always repay your loan fully.
Insurance Valuation
The insurable value is based on cost of Production; loss expected income or cost of establishment for on exposure unit such as acre or hectare agreed with the farmers.
Basis of Claim Settlement - It is not based on changes in a yield on a farmer’s field, but rather measures changes of weather at his nearest weather station that representative to his farm location.
- Payouts are based on weather data received at the local weather station not your own farm.
- The policy does NOT cover losses related to: pests, flood, localized storms, hail, temperature or poor farm management.
Key Product Benefits
- Payouts are calculated automatically based on millimetre amount in excess or deficit in as measured at automated weather station and the impact of crop production.
- For financed clients, the payouts offset against their loan (the amount paid depends on amount of rainfall received)
- Payouts come quickly to provide compensation when you need it (after harvest).
- Weather insurance can improve sustainability of crop production by giving access to finance for inputs.
- Financiers are more willing to offer credit because with weather insurance risk has diminished.
