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By Giriraj Amarnath
Research Group Leader: Water Risk to Development and Resilience
International Water Management Institute (IWMI), Sri Lanka

Thousands more farmers in Bangladesh are benefitting from satellite-based flood insurance, following the expansion of an earlier pilot project. The insurance was developed by the International Water Management Institute (IWMI) and used for the first time in the country in 2019 under Oxfam’s Resilience through Economic Empowerment, Climate Adaptation, Leadership and Learning’ (REE-CALL) program. The success of this trial led the United Nations World Food Program’s (WFP) Building Resilience to Achieve Zero Hunger (BRAZH) program to offer the insurance to primarily casual workers from an additional 3,000 households. The insurance covered loss of wages during the 2020 monsoon season from the beginning of July to the end of September. Households affected by severe flooding that occurred during this period will receive a pay out of between BDT 2,700 (USD $32) and BDT 18,000 (USD $212).

The BRAZH initiative is being implemented by WFP and partners in the upazila (sub-districts) of Kurigram Sadar and Chilmari, within Kurigram District. A multi-year project that runs until 2022, it aims to improve food security for households within these riverine communities by strengthening their resilience to flood events. The project has three components: forecast-based financing, which supports early action to minimize impacts from climate shocks; seasonal livelihoods planning, which seeks to understand how seasonal shifts affect household finances; and the insurance element – termed the climate risk insurance – which will transfer risk of flooding from farmers to insurers. The project is being funded by the Korean International Cooperating Agency.

Developing the insurance

IWMI conceptualized the insurance-based flood index (IBFI) product in 2016. In 2017 and 2018, farmers in 1,200 households were insured by the Agricultural Insurance Company of India Ltd and HDFC ERGO, with Swiss Re as reinsurer. Some 650 households received insurance payouts totaling INR 814,030 (USD $11,350), with payments made directly to eligible farmers. In 2019, under the REE-CALL program, 750 households in Bangladesh shared BDT 2.67 million (USD $31,500) in compensation. This initiative was a collaboration between Oxfam, IWMI, the CGIAR Research Programs on Climate Change, Agriculture and Food Security (CCAFS) and on Water, Land and Ecosystems (WLE), insurance firms Green Delta Insurance Company (GDIC) and Swiss Re, and microfinance company SKS Foundation. GDIC has been a key player and instrumental in promoting and scaling index insurance in Bangladesh .

To develop the underlying model, IWMI researchers used 250m by 250m data from National Aeronautics and Space Administration (NASA’s MODIS) satellite to map inundation on a daily basis from 2001 to 2018. This helped to highlight historic flooding patterns and show where inundation was most likely to occur in future. They validated the model using water-level data from the Bangladesh Water Development Board (BWDB) and European Space Agency (ESA) Sentinel-1 SAR satellite data. Insurance experts then designed payout conditions around anticipated timings and levels of flooding, potential crop damage, wages and other socioeconomic factors. They set the sum insured at BDT 12,000 (USD $140).

Helping farmers cope with floods
The 2019 monsoon brought severe floods to nine districts of Bangladesh, including Gaibandha. The insurance worked through calculations, from satellite images, of the proportion of land inundated in relation to the total geographical area of the upazila in question. If flooding occurred on seven consecutive days, with at least 40% of land inundated, farmers received 20% of the sum insured; if flooding occurred for this period across at least 50% of the area they were paid 40%. For prolonged flooding across 14 consecutive days that affected at least 40% of the area, they received 30% of the sum insured. And they were entitled to 50% of the sum if the inundation affected at least 50% of the area for this period.

“IWMI provided flood data for the index-based insurance project areas and also corroborated various data sources to highlight those people in the community who had been affected,” says Mr. K. N. M. N. Azam, Senior Program Officer, Oxfam, Bangladesh, and part of the project team. “In doing so, they made a valuable contribution to the wellbeing of small farmers in Bangladesh.”

Ms. Eva Begum, one of the participants in the insurance scheme, received a pay out of BDT 3600 (USD $43). She was able to use the money to quickly repair her home and get back on her feet. Without the insurance, she said, she would have had to take out a loan with interest, and would have been anxious about making the repayments. The compensation payments for the farmers affected by the 2020 monsoon are in the process of being verified for payment.

Syed Moinuddin Ahmed, Additional Managing Director and Company Secretary at Green Delta Insurance Company agreed, “I am excited about this partnership with IWMI in Bangladesh as the product is addressing the challenges faced by agriculture laborers due to climate change. Moreover, through supporting marginalized people by ensuring their financial security during devastating floods, it will also strengthen Bangladesh’s journey towards meeting the Sustainable Development Goals.”