Pilot of Farmers’ Insurance Scheme to Get Underway Next Year

Minister of Agriculture and Fisheries, Hon. Dr. Christopher Tufton, has informed that the first phase of a project, to develop a parametric insurance scheme for farmers, has been completed, allowing the pilot to be implemented next year.
The project, which is being funded by the Inter-American Development Bank (IDB) and the World Bank, allows for the development of a payment mechanism for farmers, who have lost crops as a result of extreme weather conditions.
Dr. Tufton, who was addressing the annual general meeting of the All Island Banana Growers Association Limited on July 16 at the Jamaica Conference Centre, downtown, Kingston, explained that coverage would be based on pre-defined risk factors, such as certain levels of wind or water damage.
“It requires a level of infrastructure in the critical areas that measure these risk factors. So if you contribute ‘x’ amount of money, a 50-mile an hour storm would trigger a particular pay out that is pre-determined, based on the contributions that you put into the programme,” he outlined.
Dr. Tufton, in his budget presentation last year, had informed that the Government was in dialogue with the IDB to implement the parametric insurance model for some critical crops such as banana and coffee, as well as greenhouse production.
“This model will require a four-way commitment, involving the Government, in terms of providing the infrastructure to measure the parameter (for example, automatic weather stations); the farmers, who will be required to pay premiums; the insurance companies, which will provide coverage; and re-insurers for underwriting the risk,” he said.
Last year, CGM Gallagher, the Caribbean’s largest insurance broker, was hired by the Government to conduct a study on the feasibility of providing insurance coverage for the agriculture sector.
Funded by the World Bank at a cost of US$100,000 to US$150,000, the study covered risk mapping, market research, weather and agricultural data quality assessment and access, distribution channels, and required government expenditure.
The IDB was brought onboard to fund further research, at a cost of US$60,000, which looked at the regulatory environment to see if the existing laws could facilitate the introduction of a parametric insurance product.
The agriculture sector is vulnerable to extreme weather conditions such as flooding and hurricanes, and is dependent on government assistance to recover.
In recent times, the sector has suffered major climate-related losses, with Hurricane Dean, in 2007, destroying more that US$260 million worth of crops. There was another $1.6 billion in losses in 2008, when heavy rains and wind, associated with Tropical Storm Gustav, lashed the island.
Hurricanes, coupled with the prolonged drought periods, have posed a hindrance in attracting re-insurers, as the Caribbean is deemed too risky, the Minister said.
On another matter, Dr. Tufton informed that 400 acres of lands have been identified, which will be provided to banana farmers in St. Thomas in order to sustain production in that parish.
“I know that there have been some issues related to the banana lands in St. Thomas, based on the fallout of Jamaica Producers, after they decided to exit the export market,” the Minister said.
Jamaica Producers closed operations at a St. Thomas plant and cut more than 400 jobs, following the passage of Gustav, when 70 per cent of the country’s banana farms were destroyed.