Using data from space to analyze matters on Earth has become more common lately. Satellites can produce very valuable information for better crop management if the capacity exists to decode and digest such information.
In Europe, a coalition supported by the Swiss government now uses European satellite systems to observe and forecast rice growth in developing countries and link this to insurance solutions to improve food security of more than five million small-holder farmers in developing countries in Asia.
Dubbed “remote sensing-based information and insurance for crops in emerging economies,” or RIICE, the project makes use of space-borne technology to observe the growth of rice and thereby provides an independent and transparent tool to ascertain rice information in developing countries.
Rice has been chosen as the target crop given its importance as a staple food in Asia, where 90 percent of the world’s rice is produced and consumed. Some 70 percent of the world’s poor live in Asia. The program will be implemented in Bangladesh, Cambodia, India, Indonesia, Thailand, Vietnam and the Philippines over the next three years.
Agriculture plays an important role in providing food security in developing countries. Therefore, it is important that governments and development organizations have maximum transparency on expected and actual crop yields, so that they can make better policy decisions. RIICE will help governments in Asia to mitigate risks to food security and protect farmers from the financial losses that they endure as a consequence of natural catastrophes.
By transferring the financial risks that small-holder farmers face from natural catastrophes to the formal insurance market, the budgets of small-holders and governments are protected from sudden financial shocks. Rather than organizing relief operations post-disaster, an insurance mechanism transfers the financial risk to the organized insurance sector and puts a system in place which is used to pay out the insurance benefits to the affected communities. For insurers, the difficult crop insurance market in emerging economies can be stabilized by using the remote sensing technology as a reliable and unbiased tool to calculate insurance premiums and evaluate the losses; particularly the latter would improve the performance of crop insurance schemes substantially.
One of the shortcomings of existing schemes in developing countries and emerging economies is also the time it takes until an insurance claim is settled. Through the use of remote sensing data, both the government and the insurer can see the extent to which crops are damaged as well as the exact location where the damage occurred.
Apart from its use to observe and map crop growth and crop losses, the remote sensing data can also be calibrated to make yield predictions. This can eventually help governments to make informed policy decisions to improve the equitable supply of rice, thereby reducing poverty through improved and diversified rice-based systems. It is also a valuable input to calculate an insurance product.
For the delivery of the insurance product, mastering the last mile to small-holder farmers is going to be a major challenge. Here, rural banks and cooperatives will play a major role, and insurance literacy progams will bolster the necessary insurance awareness among the small-holder community.
Technology is an important part of the food security equation - but at the end of the day, it is how technology is being used which decides its value. Setting up the relevant public-private partnerships for that purpose requires substantial management capacity.
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Michael Anthony is the head of microinsurance and food security at Allianz Reinsurance, where he works on implementing agricultural insurance schemes to protect small-holder farmers against financial risks brought about by natural catastrophes. He joined Allianz in 2002 as corporate affairs spokesperson and then as climate change adviser. Previously a journalist in Tel Aviv and Berlin, Anthony founded and was managing director of the journalists.network institute in Berlin.