James Kipkoech inspects his dying maize crop (Photo: Wesley Langat)
National Assembly Finance Committee through its chairperson, Joeph Limo has submitted a bill in the August House which if passed will see farmers protected against severe weather conditions such as drought and flood that have over the years caused losses to the agricultural producers.
In a 2013 case study on the effects of drought on crop production in Makueni County by Rosemary Wanjiku Gichure for the University of Nairobi, the respondents interviewed confirmed that inspite of planting drought resistance crops, they had experienced severe drought that dried their crops further exposing them to vulnerability of household food insecurity.
The bill, Insurance (Amendment) Bill, 2018, is seeking to amend the Insurance Act and introduce index-based insurance that will determine the amount of money compensated to farmers and livestock keepers due to environmental conditions or the index that is bound to cause agricultural production losses.
This is in line with March 2015 proposals by World Bank that recommends insuring farmers against unforeseen weather events is a standard practice in developed countries but still a challenge in developing countries leaving small farmers particularly vulnerable to vagaries of nature.
The proposal further indicates that a severe drought, a devastating earthquake or another extreme weather disaster can wipe out small farmers. Such uncertainties make them more risk averse and less likely to invest in inputs to grow and expand their farms.
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The Insurance (Amendment) Bill, 2018’s main objective is to amend the Insurance Act to address the adverse selection and high cost of loss assessment related to traditional indemnity-based agriculture insurance by providing for index-based insurance as an alternative.
“This seeks to reduce moral hazard, adverse selection, underwriting and claim assessment costs while speeding up claim settlements,” states part of the bill.
Government and independent estimates place the value of livestock in Northern Kenya alone at Sh46 billion, a huge insurable industry.
The weather uncertainty brings potential for agricultural insurance, which is still considered niche in Kenya. The Association of Kenya Insurers estimates agricultural insurance accounts for four per cent of gross written premiums, which totalled Sh362.5 million in 2015, up from Sh270.4 million in 2014.
Crop insurance accounted for 59 per cent of GWPs, while livestock insurance made up 41 per cent. Claims incurred were Sh118.8m, down from Sh175.8 million in 2014.
In Kenya 75 per cent of population earns a living from agriculture and the sector is dependent on rain as opposed to irrigation agriculture and when drought occurs, I causes a decline in food production, according to Government of Kenya 2007 statistics.
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