Jamaica considers insurance scheme for coffee industry

The coffee industry of Jamaica represents one the largest earners of foreign exchange, approximately US$30 million in 2008. (Photo: DefinitiveCaribbean.com)

KINGSTON, Jamaica, January 28, 2010 – Jamaica’s coffee farmers are now one step closer to effective crop insurance coverage, based on an agreement between the government and the World Bank to conduct a feasibility study for the introduction of a weather-risk insurance scheme for the coffee industry. 

The deal was signed this week by the country’s Agriculture Minister, Dr Christopher Tufton; Coffee Industry Board Director General, Christopher Gentles; and World Bank Senior Agriculture Economist, Diego Arias.
 
“The issue of agricultural insurance is central to the sector’s sustainability, given that Jamaica is in the hurricane belt which makes it susceptible to extreme weather events,” Dr Tufton said. That vulnerability was demonstrated by the losses experienced by the sector between 2004 and 2007, amounting to some J$13.47 billion (US$151 million), with coffee accounting for J$51 million (US$572,519) of that total.

The Minister noted that the situation not only in Jamaica, but also in the wider Caribbean, was exacerbated because of the difficulty in attracting re-insurers. The region is regarded as being too risky, due to the difficulty in providing coverage for small farm holdings, as well as the technical problems in designing hurricane and flood damage schemes for the agricultural sector.

The coffee industry of Jamaica represents one the largest earners of foreign exchange, approximately US$30 million in 2008. However, coffee production has faced many extreme weather events during the past years, mainly hurricanes, which have caused declining productivity and crop damage, destabilizing the industry in the process.

Based on these challenges, the Government approached the World Bank, which has done significant work in this area in the past five years, for support in designing a country strategy to manage weather-risk within the sector, using the parametric model which has had proven success internationally.

“Agriculture has a key role to play in enhancing food security and reducing poverty,” Arias said. “The World Bank is ready to support Jamaica’s efforts to develop agriculture insurance for the coffee industry by providing the necessary knowledge, expertise and services.”

Under the agreement, the parties will evaluate the feasibility of weather-risk management for coffee value-chain operators in the Blue Mountain region. This pilot study is being financed by the World Bank, through a grant from the European Union’s All ACP Agricultural Commodities Programme.

The project will include conducting weather-risk modeling and quantification; assessing different insurance options based on the technical findings; creating a weather insurance prototype product; and designing the schemes administration and premium collection payouts.