21 january 2008 elliot vhurumuku development of the weather indices - four components of livelihood...
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21 January 21 January 20082008
Elliot Vhurumuku Elliot Vhurumuku
Development of the Weather Development of the Weather Indices - Four Components of Indices - Four Components of
Livelihood ProtectionLivelihood Protection
*Livelihoods + Early Assessment + Protection
AGENDAAGENDA• Background to Risk management in
Ethiopia: Managing Risk instead of Managing Disasters
• The Ethiopia Phase II: Risk Management Framework
BackgroundBackground
The 2006 WFP Drought Insurance Pilot project: – designed in response to Government’s concern
that Ethiopia was wrought in a cycle of responding to disasters rather than managing risks.
– The pilot tested the possibility of leveraging donor contributions to secure a reliable, timely and cost-effective way of funding emergency operations
THE 2006 ETHIOPIA THE 2006 ETHIOPIA TRANSACTIONTRANSACTION
• Risk Transfer Structure–Counterparty (buyer of option): UN World Food Programme – on behalf of Government of Ethiopia
• Competitive Tender Process–Official UN WFP procurement process–9 companies invited to tender, 5 participated–Tender Winner (seller of option): AXA Re, Paris–Final Transaction:
• Premium: $930,000, paid by USAID mainly• Maximum Payout: $7,100,000
Lessons Learnt from the PilotLessons Learnt from the Pilot• It is likely feasible to use market mechanisms to
finance drought risk in Ethiopia; • It is possible to develop objective, timely and accurate
indicators that serve as a relatively good proxy of actual aggregate needs;
• Ex-ante resources can give Government and international institutions the incentive to prepare contingency plans that set forth specific responses to specific scenarios;
• Ethiopian weather data from NMA satisfies international weather risk market standards; and
• If insurance is to become an effective risk-management tool for Ethiopia, it must be coordinated with other financial instruments to provide more comprehensive coverage of Ethiopia’s drought risks.
11stst Workshop - Risk Management Phase Workshop - Risk Management Phase IIII
• FSCB and WFP joint-workshop at ECA on 13 June 2007 attended by 40 participants from Government, UN, NGO and donor agencies – reviewed the 2006 Drought Insurance pilot project
and discuss the way forward with focus on improving weather-based indices for livelihood protection.
– a number of recommendations from the workshop were made:
• Develop a project proposal for Phase II • Establish a Steering Committee for the project • Monitor the LEAP • Capacity development
Early Warning System
with reliable baseline and trigger points
Contingency Planning
for appropriate and timely response
Contingent Financing
of contingency plans
Capacity Building
for effective plan implementation
ETHIOPIA PHASE II – ETHIOPIA PHASE II – RISK MANAGEMENT FRAMEWORK RISK MANAGEMENT FRAMEWORK
II. Support CP Process:Develop budgeted contingency plans
IV. Establish timely emergency financing through use of contingency financingWFP participates in CF package + manages Insurance bit
I. IMPROVED INDEX: Refine + Monitor LEAP (with GoE)
III. Help to build planning and implementation capacity at regional level
PROBLEM: TIMING and NATURE OF PROBLEM: TIMING and NATURE OF INTERVENTIONSINTERVENTIONS
E.g. Safety Net Areas - HighlandsE.g. Safety Net Areas - Highlands
Aug Dec Jan 2008
Feb MarSept
Crop+ Emergency Needs Assessment
Emergency Appeal
Apr May June July Aug
Life Saving Interventions (mostly food)
NovOct
Aug Dec Jan 2008
Feb MarSept Apr May June July Aug
Enrolment of Beneficiaries Cash or food for work
RATIONALE (I): EFFECTIVENESS - PROTECT RATIONALE (I): EFFECTIVENESS - PROTECT LIVELIHOODS FIRSTLIVELIHOODS FIRST
Example: Tigray, EthiopiaExample: Tigray, Ethiopia
NovOct
Funds disburse
LEAP Index signals severe
livelihood stress
Early Warning System
with reliable baseline and trigger points
IMPROVED INDEX – IMPROVED INDEX – PART OF RISK MANAGEMENT FRAMEWORKPART OF RISK MANAGEMENT FRAMEWORK
I. IMPROVED INDEX: LEAP
PROGRESS MADE
Role of LEAP as a risk management Role of LEAP as a risk management frameworkframework
provide a good proxy estimate of the costs of protecting transient food insecure peoples’ livelihoods at the time of shock;
be an independent, objective, verifiable and replicable index of livelihood losses in the country;
convey information in near real-time to ensure that to the extent possible the response to livelihood crises will be more timely and effective.
Provide early warning of livelihood stress levels Signal amount of financial resources required
for livelihood protection at regional levels Crop and pasture monitoring
Contingency Planning
for appropriate and timely response
RISK MANAGEMENT RISK MANAGEMENT FRAMEWORKFRAMEWORK
II. Develop budgeted contingency plans
WFP COMPETENCY
II. CONTINGENCY PLANNING II. CONTINGENCY PLANNING IN CONTEXTIN CONTEXT
LEAP LEAP
LivelihoodsLivelihoods
Appropriate and timely response
Appropriate and timely response
Contingent Financing
Contingent Financing
protects
triggers activates
implement
Contingency Plans
Contingency Plans
•Drought Risk Assessment
•Drought Impact Assessment
•Drought Scenarios
Types of intervention needed
Timing of intervention
Target population
Costs
•Implementing partners
Capacity Building
for effective plan implementation
RISK MANAGEMENT RISK MANAGEMENT FRAMEWORKFRAMEWORK
III. Build planning and implementation capacity at regional and woreda level
Initiated but more needed
III. CAPACITY BUILDING + OWNERSHIPIII. CAPACITY BUILDING + OWNERSHIP• Government and development partners agreed
that the index should be developed with participation of all stakeholders.
• A Technical Steering Committee chaired by FSCB, was established to oversee the implementation of phase II of the project.
• Training of Government (MOARD, NMA, and FSCB staff) on the LEAP software package was done in June and October.
• A concept note and project proposal for LEAP development and endorsed by the Technical Steering Committee.
• The phase II was funded jointly by the Government, WFP, the World Bank and FAO.
Contingency Financing
of contingency plans
RISK MANAGEMENT RISK MANAGEMENT FRAMEWORKFRAMEWORK
IV. Establish timely emergency financing through use of contingency financing
WB + DFID (?) + WFP (?)
Beneficiaries of LEAPBeneficiaries of LEAP
Risk
Innovative Risk Transfer Mechanisms
for Populations Affected by Natural
Disasters In Ethiopia
Donor Governments/
Agencies
Government
Risk Markets
CONCLUSION: THIS IS CONCLUSION: THIS IS IMPORTANTIMPORTANT
• Destitution
• Dignity
• Cost
• Climate Change
THANKS!THANKS!
• Ethiopia LEAP Tool download:
http://vam.wfp.org/LEAP
Free software download. Please do not distribute without consent of WFP and World Bank
• For questions: [email protected], [email protected],