Farmers may get insurance protection if damage risk is minimised

Disaster insurance can save small farmers from financial losses rendered by adverse weather events if it is coupled with actions taken before they strike to minimize harm, according to recent studies.

Losses in small to medium-sized crises are often overlooked in traditional disaster response mechanisms but they put immense financial pressure on farmers, making it difficult for them to continue cultivation in subsequent seasons.

Civil society based pooled funding mechanism Start Fund Bangladesh (SFB) found that an investment of just $902 in embankment repairs protected assets and livelihoods worth up to $5.86 million during Cyclone Remal last year.

It concludes that minimal investments in embankment repairs through "anticipatory actions" resulted in significant savings for households and communities.

Anticipatory actions mean steps to reduce harm before a predicted disaster happens or before its worst effects are felt.

So, when the impact of a disaster is contained, the subsequent losses can be covered by insurance.

In a study report, the Department of Disaster Management (DDM) says anticipatory actions through disaster management committees at the ward level, combined with insurance coverage, could support disaster-prone farmers, address climate change impacts, and ensure food security in Bangladesh.

The DDM submitted the report to the Ministry of Disaster Management and Relief last year.

The ministry has committees at the ward level that can identify the right beneficiaries.

Farmers in an insurance scheme under Sadharan Bima Corporation may pay 20 per cent of the premium through mobile financial services, such as Nagad and bKash, while the government can cover the remaining 80 per cent of the premium from the relief fund, said Jalal Ahmed, engineer of the Construction of Flood Shelter Project at the DDM.

Disaster insurance, a key component of climate risk insurance (CRI), includes traditional crop insurance, index-based crop insurance, and weather index-based products.

CRI serves as a financial safety net against extreme weather, helping vulnerable households manage climate shocks, reducing migration pressures, and safeguarding food security, said experts.

Insurance schemes should involve small-scale payouts, enabling farmers to reinvest in agriculture without financial distress, according to experts.

"If farmers receive compensation for damages, they can avoid debt and financial hardships," said Nafisa Tasnim Khan, senior programme officer for Climate Justice and Natural Resources Rights at Oxfam in Bangladesh.

The country ranks as the seventh most vulnerable country to natural disasters globally, according to the Climate Risk Index (2000-2019).

The National Plan for Disaster Management (2021-2025) notes that cyclones such as Roanu, Mora, Fani, Bulbul, and Amphan hit the country's coastal regions, while monsoon floods in 2020 submerged over 36 per cent of the country, impacting 30 districts in the northern, northeastern, and southeastern regions.

This is the backdrop against which Ms Nafisa emphasized the need for CRI to ensure that farmers can quickly recover from losses in one season and prepare for the next cultivation season.

However, there have been many small-scale, donor-supported climate insurance projects in Bangladesh but none of them has shown promise.

Disaster risk reduction measures were the components missing in the projects, experts point out.

"So, non-life insurance combined with anticipatory action and proper early warning systems can be beneficial for small farmers," said Md. Shamsuddoha, chief executive of the Center for Participatory Research and Development (CPRD).

A study by the CPRD found that only 12.5 per cent of insurers currently offer traditional risk transfer insurance.

Mr Shamsuddoha suggested that insurance schemes should be more effective if applied to large-scale agricultural projects, such as shrimp enclosures in disaster-prone areas, where both insurers and farmers could be benefited.

Palli Karma-Sahayak Foundation (PKSF) Managing Director Md Fazlul Kader also advocates for anticipatory actions to minimize damages and insurance coverage to protect livelihoods in flood-prone regions.

Ahmadul Haque, director (admin) of the government-run Cyclone Preparedness Programme, acknowledged the absence of financial investment in climate change adaptation and risk reduction.

He stressed the importance of incorporating index-based climate risk insurance into national disaster risk management strategies and climate adaptation plans to build resilience against losses.

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