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Using insurance to protect the poorest against climate change risks

A farmer shows his failed crops and farmland in the Megenta area of Afar, Ethiopia. The farmer said he has lost 100 percent of his crops. (AP Photo/Mulugeta Ayene)

For this week’s Humanosphere podcast we’ll be talking about how climate risk insurance can protect the world’s poorest communities against climate risks, which can cost them their livelihoods and wider development.

We spoke to Stewart McCulloch, global insurance director of Vision Fund, the microfinance operation of World Vision, to find out how the world’s poorest farmers can thrive and not just survive after climate shocks.

In November, Humanosphere’s Lisa Nikolau reported on microinsurance programs in Guatemala that aim to protect populations against natural disasters by protecting low-income customers in areas that have normally been considered not insurable. Our podcast aims to go a little deeper: to look at whether programs like climate insurance can be effective in a world where the effects of climate change are becoming more and more pronounced, especially in the developing world.

Some of the most affected communities include those most at risk of environmental shocks – from floods and droughts to hurricanes and typhoons. Around two-thirds of the extreme poor work in agriculture, one of the sectors most affected by natural hazards and disasters. For the 2.5 billion smallholder farmers around the world who are responsible for 50 percent of the world’s agricultural production, extreme weather patterns put their livelihoods at risk, destroying crops, jeopardizing financial security and pushing them further into poverty.

Stewart McCulloch of Vision Fund.

Stewart McCulloch of Vision Fund.

Smallholder farmers, pastoralists and others whose livelihoods depend on predictable weather patterns are especially vulnerable. The idea of insurance is to mitigate the loss that farmers, for example, face by providing them with the tools to become more resilient.

When climate shocks occur, those living in or close to poverty are the least able to cope, because they lack assets, savings, adequate government support or other safety nets. Two billion people globally have no access to financial services – this “unbanked” population are disproportionately female, and disproportionately live in the poorest countries in Africa and Asia – a population underserved by many microfinance and lending institutions. Today vulnerable people still have extremely limited access to insurance coverage that protects them from climate risks.

Without insurance or other forms of support, vulnerable people who have lost their crops or seen their business wrecked are often forced to resort to survival strategies that can have devastating long-term consequences, such as spiraling into debt, selling off animals or belongings, skipping meals, or pulling children out of school. A rapid insurance payout can prevent this from happening.

“There’s an awful lot of people supporting us [Vision Fund] with enormous amounts of data, but the smart thing is in designing triggers. The sorts of triggers we’ve been developing at the portfolio level ask, ‘how can you use climate and agricultural information together to get a better view of the actual risk to our clients as a whole?’”


In November 2013, Typhoon Haiyan destroyed towns and communities throughout the Philippines, leaving millions of Filipinos homeless and without a viable livelihood. Vision Fund and Philippines-based credit institution, the Community Economic Ventures, Incorporated (CEVI), used a recovery-lending approach that increased lending, allowing clients to access fresh loan capital to jumpstart their livelihoods.

Since then, it has helped around 26,500 whose livelihoods were destroyed in floods in Myanmar, earthquakes in Ecuador and recently El Niño caused droughts in Malawi, Zambia and Kenya.

“We’ve now not only worked on typhoons, but floods, droughts and earthquakes to develop our techniques [that answer the question]‘what do the poor need to restore their livelihoods following a disaster?’ This is particularly the case where insurance isn’t necessarily present in large volumes,” McCulloch said.

The value of micro-insurance goes beyond rescuing a smallholder farmer’s livelihood, McCulloch argues – it allows them to build back stronger and increase crop yield and income:

“In a number of projects we have, our clients are increasing their incomes ten-fold over a two and three year period; that involves them changing their lifestyles and changing their lives quite materially. And that the insurance does it that case – it’s actually less about protection and more and more about giving them the confidence to make the investments and changes they need to make”

McCulloch has been working with Vision Fund to create financial safety nets for the poor, with a particular emphasis on the issues brought about by increasing climate volatility on the livelihoods of families in Africa and Asia. Over the last three years, he has been responsible for the delivery of microinsurance solutions to Vision Fund’s more than 1 million clients. Prior to joining Vision Fund Stewart had a 30-year career in international insurance including leading Lockton International, an international insurance broker as CEO.

But before the chat, Humanosphere chief editor Tom Paulson and producer Imana Gunawan talked about the hopeful highlights of the week, including the near-eradication of the Guinea worm disease in Mali; Philippines president ordering free contraceptives for 6 million women; and a push from India’s Supreme Court to hold charities accountable.

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About Author

Charlie Ensor

Charlie Ensor is a Nairobi-based freelance journalist, focusing on refugee rights, development and humanitarian crises in East Africa. His work has also featured on the Guardian and WhyDev; he also writes his own blog on development and aid issues. Charlie tweets @charlieensor, and you can contact him at