Earth Observation at the Service of Food Security

Agricultural risk insurance improves the resilience of farms to adverse weather events such as flood and drought. However, smallholder farmers and rural communities, especially in developing countries, cannot afford to buy risk insurance coverage. Earth Observation data can support the uptake of agriculture insurance in developing countries by providing more accurate, reliable and frequent information on climate-related effects.

Every year adverse weather events (droughts, excessive rainfall, frost, hail, windstorms) cause substantial losses to farmers, contributing to rural poverty and food insecurity. This is especially true in developing countries, where the big majority of the population rely on farming for their livelihood. At a global level, between 2003 and 2013, natural disasters affected 2.7 billion people, with damages amounting to 1.3 trillion dollars, according to the Food and Agriculture Organization (FAO). The farming sector absorbed 22% of this economic damage.

The impact of adverse weather events on agriculture, livelihoods and infrastructure is a threat to all dimensions of food security. It affects food availability by reducing the productivity of crops, livestock and fisheries, and hinders access to food by disrupting the livelihoods of millions of people in rural regions, who depend on agriculture for their income.

To cope with the weather-induced effects on food security, some farmers, farming cooperatives and other agri-business stakeholders are taking agricultural risk insurance in order to transition out of basic subsistence farming and to adopt a more resilient approach. However, the poorest smallholder farmers and rural communities cannot afford agricultural risk insurance because the costs are too high.

Why are agricultural risk insurance costs still so high?

The value set for insurance premiums are dependent on accurate, reliable, and up-to-date information on flood and drought risks and events. While some insurance companies currently use remotely sensed data to support their risk assessments and post-event situational awareness, there are still many technical limitations such as coarse spatial resolutions, infrequent updates, lack of drought and flood event forecasting capability, and limited ability to verify insurance claims. These are causing high-risk assessments and high operational costs for insurance companies, which are reflected in the premiums.

Smarter, more accurate forecasts can lower insurance premiums

“More spatially accurate, reliable, and frequently updated information on drought and flood situational awareness will help insurance companies to have a better assessment of risks and post-event damages, and to have more efficient management and processing of claims following an event,” said Cedric Seynat, Director, Business Development, Systems Engineering at RHEA Group.

The company recently launched a project, with funding from the European Space Agency (ESA), to investigate how drought and flood prediction and monitoring services derived from space-based Earth Observation data might support the uptake of agriculture insurance in developing countries, with an initial focus on Uganda.

By providing timely and relevant information on drought and flood risks to insurance companies, using satellite technology such as the remote sensing satellites of the European Copernicus program, the project aims to investigate to which extent this information can help insurance companies reduce their risk assessments and operational costs. In turn, this reduction may result in lower insurance premiums, making insurance more affordable and less dependent on public subsidies.

Ugandan farmers are mainly smallholder farmers who do not have adequate mechanisms of mitigating weather-related risks such as droughts and floods. With better affordability, the uptake of insurance by smallholder farmers, farming cooperatives, or other stakeholders in the agri-business would become higher, which in turn will contribute to make the agriculture insurance business in developing countries more economically sustainable.

“It will also have a positive effect on the willingness of financial institutions to invest in the sector and offer loans at affordable interest rates, which smallholder farmers can use to obtain the funding they need in order to bring them out of subsistence farming to more resilient farming operations. This virtuous circle, therefore, contributes to alleviating concerns on food security overall,”
Cedric Seynat, Director, Business Development, Systems Engineering at RHEA Group.

The project is part of ESA’s ‘kick-start activities’ programme, under the ‘Food Security’ theme. Under this program, ESA supports industry in exploring the viability of new services making use of space technologies, and in consolidating the understanding of the needs of end-users of these services.

Earth Observation

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