Agriculture Risk Management Symposium Antigua and Barbuda June 16-19, 2010

1. Small holders Agriculture Insurance in the Caribbean: The Case of farmers in St. Elizabeth and Portland parishes in Jamaica. Pablo Valdivia World Bank Consultant Agriculture Risk Management Symposium Antigua and Barbuda June 16-19, 2010

2. Farmers Characteristics: Very Small plots of land for a wide (huge) variety of crops • The majority of land holdings in St. Elizabeth and Portland are small (<2 Ha). • Portland: 61.28% • St. Elizabeth: 88.91% • Multi-croppingsystemsfunction as a Risk Management Strategy. • Main Crops: • Portland: Plantain/banana, coco, coconut, coffee. • St. Elizabeth: yam, banana, cassava, tomato, peanuts, sweet potato. • Permanent crops vs cereal crops • Livestock breeding is as important as crops production.

3. Jamaica Faces a Variety of Natural Hazards • Jamaica weather conditions varies both spatially and temporally. • Average rainfall is 1,981mm. • Heaviest rainfall:5,080 mm (Blue Mountain). • Driest area: 762 mm (Kingston) • Maximum rainfall: May and October. • Driest months: February and March. • There are 3 weather hazards that cause the greatest economical impact in the Agricultural sector in Jamaica: • Short-duration extreme rain. • Longer term substantial deviations from average rainfall (Excess of rain, drought). • Short-duration extreme winds.

4. Multiple risks impact crops production. Crops exposure to weather risks varies accross the year Crops susceptibility to weather risks and to pest and diseases vary between crops and even within the same crop.

5. What risks are insurable? Currently, which are the major challenges? • There are risks that are very challenging to insure and/or are not insurable: • Flood risks • Landslides • Wind speed. • Huge number of farmers + very small holdings for agricultural production. • Potential insured areas are dispersed. • High Administrative costs to operate insurance. • Multi-cropping systems. • Planting dates not clearly defined. • Limited financial capability to purchase insurance contracts. • Limited access to credit(?) • Basis risks. • Limited access to data (loss data / weather data) • Crop insurance could be a low priority for farmers.

6. No identifiable distribution channel for small farmer insurance? • Limited information (i.e. production, losses, farmers, ex-post disaster assistance to farmers). • Would it be feasible to work with every single farmer? • Who are the leaders within the farmers that could transmit / coordinate / transfer messages to others? • Do not belong to commodity boards • Do not borrow from financial institutions or there is very limited bank branches in rural areas. • Little if any association, except for RADA Producer groups.

7. Small farmers have various ways to cope with agricultural risks • Systemic events on agriculture production are retained by the agriculture sector and the Government. • From 2004-2008, J$13 billion of direct damages to the agriculture sector (estimated). • Coping Strategies: • Own savings. • Borrowing from • Neighbors. • Informal networks. • Selling assets (livestock). • Replanting (short crop cycle varieties). • Diversification (new crops).

8. What value proposition represents agricultural insurance then? • In this scenario, the recommendation is to strength the non-transfer risk management tools • Prevention • Coping Agricultural insurance is only one instrument to cope with risks.

9. 1. Prevention. Is there any chance to provide protection to stakeholders against disasters, to prevent the occurrence of a disaster or to reduce its intensity? • Identifying risk-proneareas. • Risks mapping. • Vulnerability maps. • Promoting the adequate use of lands. • Strengthening institutions / Transferring capacities to staff on risk management issues. • Shareinformation • Adopting better practices • Planting & Following sowing calendars (s. window) • Providing certified seeds to farmers. • Building, improving , maintaining drainage. and irrigation infrastructures. • Mulching for humidity retention. • Sowing new crops (resistant to drought, excess of humidity…)

10. 2. Coping: How a coping mechanism should be? The coping mechanisms administered by the Government for CAT events should have: A riskfinancing in place • Deliverychannelneedstobe: • Efficient • Transparent. • Clear

11. Conclusions : Small farmers risks transfer is very challenging. • Agricultural insurance does not fit all; it is not the panacea • There are some risks that are not insurable. • It makes more sense when the Government strengthens its institutions, and cooperates with the private sector to cope with risks that affect agriculture production. • Implement and develop a sustainable program / mechanism. • Agricultural production in vulnerable areas has to be considered as part of an overall risk management plan. • Basis risks at Meso-level & Macro-level contracts could be less of a concern than individual contracts. • Transaction costs could be lower • Speed the process that is involved in assisting farmers (macro). • Distribution channels are needed to reduce costs related with insurance marketing, operation, and promotion.

12. Muchas gracias!!... Thankyou!!!