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Roadmap for Integrated Climate Risk Management in Ghana
Natural disasters and their associated damages severely impact people around the world every year. Increases in exposure and vulnerability at a global level, linked to the multiple concurrent trends such as climate change, population growth and globalization of supply chains are making it imperative to find strategies to manage disasters more holistically. Integrated Disaster Risk Management (IDRM) is an approach for dealing with the risk and manifestation of natural disasters. It is characterized by a holistic perspective with regards to the various components of risk management. IDRM...
This roadmap is developed from work undertaken on ICRM through the “Promoting Integrated Mechanisms for Climate Risk Management and Transfer” project (“ICRM project”) implemented by the Deutsche Gesellschaft für International Zusammenarbeit (GIZ) GmbH and the Munich Climate Insurance Initiative (MCII). In Ghana, the ICRM project is working across three Workstreams within the agriculture sector: (1) sovereign drought risk insurance, (2) building capacities for risk prevention and risk reduction and (3) the development of insurance products for commercial agricultural actors.
The African Risk Capacity (ARC) is a continental sovereign risk pool and early response mechanism designed to execute pre‐approved contingency. ARC’s mission is to help African Union Member States to protect the food security of their vulnerable populations. As an insurance risk pool, ARC’s objective is to capitalize on the natural diversification of weather risk across Africa, allowing countries to manage their risk as a group in a financially efficient manner in order to respond to probable but uncertain risks.
The creation of a contingency plan is one of the prerequisites to participate in the African Risk Capacity (ARC) as this pre-planning process ensures that countries are able to deploy ARC funds quickly and efficiently in case of weather shocks.
The objective of the project is to provide the agriculture market in Ghana with more options to hedge against weather risks resulting from droughts and floods. This includes insurance solutions, sovereign risk transfer solutions (through ARC) as well as agricultural risk prevention and/or reduction measures. Additionally, a roadmap was developed to outline recommended next steps to up-scale and intensify the efforts toward an integrated climate risk management in the agricultural sector.
Agricultural insurance is a business transaction based on the quantification of risk. The basis for all calculations of risk exposure in agriculture is sound data. Lack of data makes insurance companies shy away from agricultural insurance, either because the uncertainty makes it impossible to calculate risk or because the cost required to generate data makes the business model unviable. Generating data and making that data available to insurance companies is a key contribution from the public sector to the development of agricultural insurance. Insurers should have a right to access data...
The success of agricultural insurance depends on the demand by farmers. But while there is clearly a need for agricultural insurance, demand is not high among low-income farmers. A major factor is that the farming community has a low level of awareness about insurance. A key component within any agricultural insurance initiative is to educate farmers about the importance of insurance and how the products help them overcome difficult times. It is equally important to show farmers the limitations of insurance in order to not create unrealistic expectations
The core objective is to assist the insurance sector in Ghana to develop and offer innovative, demand-oriented and economically viable insurance products to cover financial risks on account of crop losses caused by extreme weather events and impact of climate change.
There are two major challenges with respect to agricultural insurance in Ghana: 1. Enrollment : Scaling performance of the agricultural insurance market remains low (very few products). The growth rate of the sector is very slow (36% from 2011–2016). Very poor performances in 2012 and 2013 when overall enrolment dropped by 84% and 86% respectively. These challenges are attributable to the complexity of insurance products, financial illiteracy, and aversion towards new risk management approaches. 2. Claims : The only prominent claim pay-outs were in 2015 where 1,701 farmers received a payment...
The overall aim of the project is to prepare the ground for implementing risk transfer solutions within an integrated flood risk management approach for municipalities in GAMA, Ghana.