Weather insurance to help combat famine in Africa

Swiss Re is among the major insurers considering offering weather insurance to farmers in Africa in a bid to tackle famine and drought.

The weather insurance plan as been proposed by the World Food Programme (WFP) and is expected to be launched in Ethiopia early next year, according to reports.

Insurance contracts would be based on a rainfall index, which correlates with historic, drought-induced food needs. If the index falls below a trigger line, suggesting a drought severe enough to warrant food aid, the insurance company will issue a payout which will be used to fund relief.

"Because it's based on objective data, we can take this index to insurers and private finance companies," said the WFP.

Premiums would be met by donors, who will direct funds to commercial risk-taking entities such as reinsurance companies to cover the cost of the policies.

According to Beat Werder, a spokesman for Swiss Re, the insurer had been in discussions with the WFP, and was willing in principle to underwrite such a scheme.