Caricom seeks crop insurance model

The Caribbean Community (Caricom) could be moving closer to developing a disaster risk management strategy for its agricultural sector by providing an optimal crop insurance regime that covers a wide range of risks and is affordable to small farmers in the region.

Public and private sector officials from Caricom countries have just completed a four-day symposium on agriculture in the region coordinated by the Caricom Secretariat at which it was agreed that the region would examine various formulae that could lead to a suitable agricultural insurance regime that took account of the particular conditions of the region. Among the existing insurance regimes that could come under scrutiny as possible models for the wider regional agricultural sector is the Windward Islands Crop Insurance (WINCROP) Scheme which, a Caricom Secretariat press release says “could be broadened in pursuit of a coordinated risk management agenda for agriculture.”

The symposium, held in Antigua, learnt that WINCROP, which was set up in 1987, had recorded success in responding to damages in the banana industry in Dominica, Grenada, St Vincent and St Lucia during hurricane periods. Two years after its establishment WINCROP made payments to 8,882 claimants totalling EC$8 million to farmers following Hurricane Hugo in 1989. In 1995 WINCROP made a payout of EC$15 million to 14,905 farmers following several major storms in the region.

A regional forum on increased private sector investment in the Caribbean held in Guyana last year, saw local private sector officials and commercial banks raise the issue of crop insurance in response to official appeals to the business sector to pursue investment in the agricultural sector. The issue of protecting agricultural produce against weather-related disasters has assumed an increased poignancy here following the major floods of 2005 and 2006 which decimated farms across coastal Guyana.

In Antigua, Supervisor of the Caribbean Catastrophe Risk Insurance Facility (CCRIF) Simon Young is exploring the possibility of becoming a catalyst for risk management innovation. CCRIF was developed by regional governments in response to climate-related threats to small-island states in the region and functions through the region-wide pooling of risks. Young says the sustainability of the facility is guaranteed through the pooling of a single re-insurance transaction which improves access to global markets.

In considering the various insurance schemes that might be applied to the region’s agricultural sector, the Antigua forum also discussed the index-mechanism used extensively in the privately-run energy in the United States, World Bank senior economist Dr Carlos Arce told the Antigua symposium that index insurance is a mechanism that might be applied to the agricultural sector to measure the impact of weather risks on crops. The index insurance mechanism has been successfully applied in South Africa where farmers required coverage against drought. Arce told the symposium that the index insurance concept was flexible and applicable at the micro level to individual farmers, at the aggregated level to farmers’ and at the macro level with governments as policyholders. Arce says the World Bank is prepared to work with the region to compliment efforts currently underway towards the development and management of an efficient agricultural insurance scheme.

Meanwhile, the Caricom Secretariat says the Caribbean Development Bank (CDB) is signalling a renewed enthusiasm “to associate itself with the aspirations of the Caribbean people to renew its role in the agricultural sector.” The Bank’s Director of Finance and Planning Dr Warren Smith told the Antigua forum that the region was experiencing a “renaissance in agriculture.” Smith told the forum that disaster risk management had become integral to the operations of the CDB and that this awareness had prompted the bank to build its capacity in mainstreaming disaster risk management issues.

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