LONDON (Reuters) - The Swiss Re backed-micro-insurance project that provides drought insurance for crops in Ethiopia will be expanded to Senegal, the companies involved said in a joint statement late on Monday.
The five-year project, known as the 'R4 Rural Resilience Initiative', was developed by the World Food Programme (WFP) and Oxfam America to allow farmers to use labour to pay for a weather-based insurance contract that will provide compensation if a severe drought event hampers crop growth.
Micro-insurance insures low-income people against specific perils in exchange for premiums proportionate to the likelihood and cost of the risk involved.
In June, the R4 programme was launched in Ethiopia, with a $1.25 million investment from Swiss Re.
The world's No.2 reinsurer will design the risk transfer solutions to reinsure the programme, which currently covers Ethiopia and Senegal, and an additional two countries, which are yet to be chosen, for the next five years, said the statement.
The U.S. Agency for International Development (USAID) has committed $8 million to expand the R4 initiative and the global development of the project. USAID funds WFP in the R4 collaboration, while Swiss Re funds and supports Oxfam America.
"Our goal is to maintain the level of service in Ethiopia at least to its current level of 13,000 households going forward and ramp up along the same lines in Senegal so that we are serving 18,000 households by year three of the five-year initiative," David Satterthwaite, senior global micro-insurance officer at Oxfam America, told Reuters.
He said the initiative's overall goal is to raise $29.5 million from outside investment to fund the five year initiative, after securing commitments totaling $9.25 million in the first nine months.
The R4 initiative follows a multi-year pilot in Ethiopia which started in 2008 known as the Horn of Africa Risk Transfer for Adaptation (HARITA) project, involving a consortium of private corporations and charities, which offered an insurance-for-work programme for farmers in the region.
In September, U.S.-based micro-insurance fund LeapFrog Investment committed $15 million to finance business firm Shirram Group, which provides insurance and investment products to the low-income and emerging consumer market in India.