UNDP moves on to pursue indemnity and index insurance to secure Kazakh farmers

May 3, 2016

Farmers in Kazakhstan are turned on to use the advantage of a new innovative, indemnity and index insurance scheme which settles the contemporary advanced climate projection technology and satellite data to assist agricultural workers in the face of drought condition.

Collaboration with Ministry of Agriculture and its subordinated sub structures, with the assistance of the US based agency WeatherPredict consulting and UNDP Kazakhstan has resulted to launch first steps to backbone an important Government-backed insurance scheme in Kazakhstan, the Kazhydromet and National Center for Space Research and Technology, helping to protect the livelihoods of some of the region’s farmers against the negative impacts of severe weather.

“This partnership between the government, international agencies and the private sector benefits vulnerable farmers to secure their farming business through international good practice. It is a really innovative form of cooperation,” said Yerlan Zhumabayev, Manager of project Water Transformed: Sustainable Water Solutions for Climate Change Adaptation and DRR at the UNDP Kazakhstan.

One aspect of the new scheme will focus on wheat insurance, while another will be dedicated to protecting livestock production. The programme has been designed and drawn from the  experiences of benchmarked programmes in the USA, India, and China.

Undoubtedly, both indemnity and index insurance schemes utilizes advanced technologies to set indexes to determine the triggers to start the policy case, essentially using normalized difference vegetation index to be derived from the satellite data to assess what impact climate change and variability have had on crop and livestock conditions.

The programme is based on state-of-the-art methods and approaches of collecting crop yield data, using statistical sampling methods, GPS-tracking devices, and mobile phones. This offer promises a greater accuracy and transparency.” The whole concept is stipulates a right time-bounded analyses versus the relationship between soil moisture observed by in situ probes and satellite derived surface wetness in Kazakhstan.  The soil moisture observations, provided by probe measurements, serves as calibration points to the satellite measurements. The regression equations derived from these relationships identifies the covariance between the quantities and qualities. Many of the relationships between the probe data and wetness index are to be meaningfully utilized to effectively identify how upper level moisture may fluctuate either favorably and negatively to the favor of the timing that is highly strategic for the farmers to make up a mind during the important periods of planting period. This programme could pave the way for other large-scale agricultural insurance programmes in Kazakhstan. Dynamic post consequences from this programme could be highly significant and can be applied in near real time in order to monitor the distribution of upper level soil moisture across the Kazakhstan, where the production of agricultural products is critical to ensure food security in Central Asian and other neighboring countries. said Yerlan  Zhumabayev.

Beyond Kazakhstan, this programme could fearlessly be used to secure the interest of the farmers elsewhere. If successful in assisting the Government of Kazakhstan, the farmers will be better equipped to cope with the financial burden of the loss of agricultural revenue resultant from natural disasters such as drought or other adverse environmental symptoms. Ambitiously, it’s possible that such schemes are to be proposed and replicated in all Central Asian countries that are also susceptible to natural disasters  and have a strong reliance on the agricultural sector.

Optimistically, the other greatest opportunity for the country would be introduction of globally recognized reinsurance protection programmes such as Bermuda certified companies. Further on, such cooperation may serve to provide intelligence to write nationally specific primary and retrocessional reinsurance programmes, to be based predominantly on an excess of loss given the parametric nature of the underlying insurance schemes for insurance-linked securities.

Drought can be extremely detrimental to food production and livestock production in Kazakhstan, that often has little or no insurance penetration but regularly feel the force of adverse weather events.

The innovative use of satellites, mobile phones, and other advanced technology underlines the potential for this type of scheme to be replicated and put to good use in other emerging, underserved and underinsured regions. Furthermore, the whole insurance service and programme information is to be accessible through Geoportal. This is a decent web based platform with community  forums, webinars, and interactivity to provide a one-stop source for everything about wheat crops, livestock from the latest news and research, to interviews with leading experts on in-depth and trending topics, tips, informative links to government agencies and other relevant sites, and more.

“Farmers are most vulnerable in Kazakhstan, so this programme has the potential to have a significant impact on Kazakhstan’s economic development and would play a crucial role in supporting the country’s reforms and the implementation of the State Infrastructure Development Programme “Nurly Zhol” for 2015-2019.

This programme aims at improving farmers’ resilience against different climate shocks and will enable them to adopt improved farming business and production processes ensuring the higher profit and returns.   

National Space Research Institute, Kazhydromet and other authorized state entity will obtain data from satellites to estimate the availability of greenness indexes of crops on the ground and will trigger a payout to participating farmers when greenness indices fall below a predetermined threshold.

It’s a smart and innovative approach, while the two schemes don’t pay out based on the actual drought event. The data received from satellites, GPS and so on, takes into account the weather event and determines if a payout will be triggered from the resulting impact on crop, pasture production, and so on.

It is planned to first introduce in June 2016 for about 1000 farmers throughout of Northern Kazakhstan, with plans to significantly broaden its reach by 2017 and on.

During the five-year period of 2010 to 2015, the Government of Kazakhstan spent more than $12.6 million a year on disaster relief. Schemes such as this will reduce financial burden of the government faced with after-catastrophe events, meaning greater economic and financial stability post-event, and also faster recovery.

The work of UNDP in Kazakhstan in initiatives such as this demonstrates how these insurance programmes e.g. indemnity and index insurance technologies and structures can be utilized to provide insurance to the farmers, while as they grow over time creating parameterized pools of risk which can provide opportunity to reinsurance and state capital.

These initiatives demonstrate the future of insurance for weather and certain catastrophe risks in regions where indemnity coverage is in place

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