Drought Insurance for Early Response

What is the humanitarian need?

Despite widespread advances in early warning systems for major droughts, the ability of NGOs to respond early to protect communities is constrained by the current funding model. Even when a known major food crisis is unfolding funds often do not materialise until media headlines hit international audiences and donors are prompted into action. At this stage many lives have already been lost, livelihoods destroyed and hard-won development gains undermined. Early, preventative action in such situations has been found to be far more effective, but this requires access to predictable funding.

What is the innovative solution?

The Drought Financing Facility will be an NGO-led network of national facilities, underpinned by a risk management approach that supports NGOs with:

• Scientific modelling of drought risks
• Focused scenario-based contingency planning
• Pre-positioned financing, including parametric insurance mechanisms that automatically release funding based on pre-defined triggers of emerging major droughts

The planned impact of this facility is a systemic shift in the business model for responding to food crises away from its current reactionary ‘begging bowl’ model of voluntary contributions to an anticipatory one – enabling early, pre-planned and pre-financed interventions that save lives, livelihoods and costs.

What are the expected outcomes?

Over this 12 month project the Start Network is tasked with refining and improving on the original design concept for the Drought Financing Facility, as well as testing the structural and operational components in 2 country locations. Our partner, GlobalAgRisk, will be working with Enki Research to invest in detailed scientific modelling of drought risk within 4-5 blocks of countries, applying a unique scientific methodology using estimates of soils moisture combined with knowledge of agricultural cropping patterns and land cover topology.
By the end of the project (June 2017), we expect to have:

1. detailed historical drought risk information for four blocks of countries illustrated on a prototype online platform which is open source
2. tools to help NGOs customise the risk models and conduct joint contingency planning and costing exercises
3. assessment of NGO due diligence requirements
4. a MEAL / Cost-Benefit-Analysis framework
5. indicative pricing for the insurance product
6. a fundraising strategy that contains input from key stakeholders.

We believe that with these six different components in place, we will be in a position to attract funding for the mechanism and launch an active pilot.