Can insurance help manage climate risk and food insecurity? Evidence from the pastoral regions of East Africa

Abstract

Can insurance cost-effectively mitigate the increasingly deleterious impacts of climate risk on poverty and food insecurity? The theory reviewed in this chapter suggests an affirmative answer if well-designed insurance contracts can be implemented and priced at a reasonable level despite the uncertainties that attend climate change. Evidence from the IBLI index insurance project in the pastoral regions in East Africa suggest that these practical difficulties can be overcome and that insurance can have the impacts that underlay the positive theoretical evaluation. At the same time, continuing analysis of the IBLI experience suggests that much remains to be done if quality index insurance contracts are to be scaled up and sustained. We conclude that insurance is not an easy, off-the-shelf solution to the problem of climate risk and food insecurity. Creativity in the technical and institutional design of contracts is still required, as are efforts to forge the more effective public-private partnerships needed to price insurance at levels that will allow insurance to fulfill its potential as part of an integrated approach to social protection and food security in an era of climate change.