Disaster insurance gains traction in East Africa as small-scale farmers in Kenya receive flood compensation

Disaster insurance in the agriculture sector has begun picking up steam in East Africa after a group of small-scale farmers in Kenya received compensation for flood-related losses. Over 300 flood-affected households in Kenya’s Tana River county received more than $91,264 as compensation for their losses. 

The first-of-its-kind compensation, under the flood parametric policy in Kenya, was part of a pilot programme by insurance company Britam Holdings with Oxfam in Kenya and global reinsurer Swiss Re. The claim was paid to Oxfam, a subsidiary of a United Kingdom charity that fights global poverty. 

Farmers had taken the Index-Based Flood Insurance (IBFI) policy, designed to cushion small-scale farmers residing in flood-prone areas from the catastrophic effects of floods.

The initiative marks a significant step in providing financial resilience to smallholder farmers, offering relief amid the ongoing floods impacting both Kenya and the wider Horn of Africa region. 

The IBFI, launched earlier this year, was developed using data modeling and satellite imagery to predetermine flood thresholds and provide coverage at an affordable cost. The system uses water level data to determine historical flooding patterns in a region for assessing premiums and indemnity, said Saurabh Sharma, director of emerging consumers at Britam.

“This innovative idea has been designed using long-term average data on rainfall and water levels in flood-prone areas like the Tana River region as parameters to pay claims,” said Sharma in a statement to the press. 

“Considering these parameters can be monitored remotely, Britam is able to pay flood-related claims swiftly. This will help in supporting the local government and other aid organisations in their flood mitigation efforts,” he added.

Following the successful pilot programme in Tana River county, one of the most common flood-prone regions in Kenya, national and regional rollouts are expected in due course. Experts are optimistic that the index-based flood insurance solution is a game-changer, especially for populations that live in flood-prone areas but lack access to conventional property insurance schemes.

Floods have affected millions of people in East Africa, resulting in thousands of deaths, displacements and other challenges such as disease outbreak, according to organisations offering humanitarian assistance such as the United Nations and the Red Cross.

“Due to climate change, events like floods have become quite frequent. We hope stakeholders will lend their support to replicate and scale up this innovative solution so that the most vulnerable households across the country and region can be protected against the burden of floods,” said David Abudho, social protection strategist at Oxfam Kenya.

General insurance in the country is characterised by low penetration levels and currently estimated at a paltry three per cent. The payout underscored the importance of collaboration between different organisations and the incorporation of technology in finding solutions to climate disasters. The Britam flood policy is targeting for as little as $45 per year.

The insurance solution is timely since it will help reduce the impact of floods and protect vulnerable households and businesses still recovering from the effects of the worst drought in 40 years and the COVID-19 pandemic, according to experts.

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