Co-design and implementation of Index Based Flood Insurance (IBFI) in flood proofing communities of Mazabuka District, southern Zambia

Umer, Y.; Makungwe, M.; Amarnath, G.; Jacobs-Mata, I.; Banda, N.; Njoroge, M. 2024. Co-design and implementation of Index Based Flood Insurance (IBFI) in flood proofing communities of Mazabuka District, southern Zambia. Colombo, Sri Lanka: International Water Management Institute (IWMI). CGIAR Initiative on Diversification in East and Southern Africa. 27p.

The Magoye River, a vital resource for communities in Zambia's Southern Province, has a history of seasonal flooding with severe consequences. During the rainy season, the river often overflows, inundating surrounding areas and causing widespread crop and infrastructure damages. Factors such as deforestation and climate change exacerbate this natural phenomenon, leading to loss of lives, displacement, and destruction of infrastructure, farmlands, and livelihoods. An innovative insurance solution has been developed to address these challenges, compensating affected communities for losses incurred during flood events. The CGIAR Initiative on Diversification in East and Southern Africa, Ukama-Ustawi (UU), identified the bundling of climate insurance as an innovative climate risk management solution for smallholder farmers in Southern and Eastern Africa. This innovation involved mapping flood-prone agricultural areas near the river, ensuring tailored support for those most vulnerable. The innovation was aimed to mitigate the financial risks associated with recurrent flooding by providing timely insurance payouts to farmers while promoting climate resilience.

The International Water Management Institute (IWMI) in collaboration with Agriculture and Climate Risk Enterprise (ACRE Africa) and Professional Insurance Company piloted the Index Based Flood Insurance (IBFI) among smallholder farmers residing along the Magoye River, Mazabuka District, Southern Province, Zambia. IWMI has developed the IBFI concept in South Asia covering India and Bangladesh using an integrated approach of combining flood model and earth observation data to flood proofing among vulnerable populations (Amarnath et al. 2024). A similar concept was scaled out for IBFI product covering three villages at the lower Magoye Catchment and first of its kind in Zambia. To build trust and enhance resilience within affected communities, a robust flood index insurance product that is flexible, transparent, and closely aligned with ground-level realities was developed. It minimizes spatial, temporal as well as design-related basis risks, ensuring payouts accurately reflect actual losses. During the development of the IBFI product, the experts from the Water Resources Management Authority (WARMA), Ministry of Agriculture, Department of Community Development, Disaster Management and Mitigation Unit (DMMU) in co-designing and implementing with the pilot villages.

The IBFI pilot was conducted for the 2024-2025 rainy season in the Mogoye Catchment, Southern Province, Zambia. The product targets 250 households in the Magoye Catchment of Zambia's Southern Province. Coverage focuses on flood risk, measured via in-situ gauges and satellitemonitored flood depth along the Magoye River. Insurance applies to individual pixels along the river, with each participating farmer receiving about K 1786 equivalent to about USD 64 as the sum insured. The 150-day cover period (November 1, 2024 – March 30, 2025) uses a 10-day observation period for flood events. Payouts are tiered based on flood depth percentiles: minor flooding (80th percentile trigger, 25% coverage), moderate (85th percentile, 50% coverage), major (95th percentile, 75% coverage), and catastrophic (99th percentile, 100% coverage).

In summary, the IBFI pilot represents a vital step forward in addressing the twin challenges of climate change and poverty. Its success could herald a transformative approach to flood risk management, offering a lifeline to vulnerable farmers and contributing to sustainable development in the region. Through innovation and collaboration, this initiative underscores the potential of insurance-based solutions in building climate resilience and securing livelihoods.