Soil Moisture Index Insurance Mozambique - protecting smallholder farmers against drought.
The right soil moisture conditions are essential to obtain good yield for farmers around the world, especially to those who farm in rainfed conditions. In Mozambique, agriculture provides livelihoods to almost 81 percent of the population (World Bank, 2015). The majority of crop production is undertaken by smallholder families who grow staple crops for consumption. These farming families face an increased likelihood of extreme weather events such as flood, drought, and cyclones due to climate change. Currently, only 34,378 of smallholder farmers in Mozambique have at least insurance against extreme climatic risks (MADER, 2021). This represents less than 1% of the total population of more than 4 million smallholder farmers in the country, as per the estimations contained in the most recent survey of the Ministry of Agriculture (FSDMoç, 2021).
Hollard Insurance is a pioneering insurance company attempting to de-risk Mozambican smallholder farmers by developing and delivering agricultural insurance products. In collaboration with Phoenix Seeds and a number of development agencies and national agricultural development projects, Hollard insurance provides farmers with improved crop seed varieties, bundled with satellite-based index insurance. Mozambican farmers who secure their inputs from the covered entities also receive reassurance that should a drought event occur, current and future growing seasons will not be a complete loss. Developing trust in the product among agrarian communities with low levels of insurance awareness is crucial for Hollard Insurance. They need to rely on a parametric insurance product which covers the actual crop damage on the ground, and is affordable and easy to explain to farmers.
The insurance product which covers farmers in the current growing season (nov ‘21 - april ‘22) is developed by reinsurance firm SwissRe using satellite-derived soil moisture data provided by VanderSat. The soil moisture measurements are based on passive microwave observations, which due to their unique sensor characteristics allow for all-weather retrievals and therefore do not have cloud cover issues as optical based EO data. VanderSat developed a unique patented technology (EU Patent # 17 728 899.0) that allows downscaling brightness temperatures to field level scale (100m), which are then transformed to soil moisture using the Land Parameter Retrieval Model (Owe et al., 2008; Van der Schalie et al., 2017). This is a large step forward from other state-of-the-art soil moisture data sets (e.g. Dorigo et al., 2017; Chan et al., 2018), which have a resolution of 9km at best. Soil moisture indices reflect directly the water content in the soil which is available for the plant to grow, and therefore correlate highly with obtained crop yields in dominantly rainfed farming conditions compared to vegetation and weather-derived indices (Mladenova et al. , 2017; Vergopolan et al., 2021). Soil Moisture data at field level with a long historical record (20 years, by using AMSR-E, AMSR2 and SMAP) enables the development of scalable index-based insurance products.
The drought insurance product covers the seeding, vegetative and harvesting phases of plant growth and is tuned to the drought sensitivities of the insured crop. For each growing phase, different drought triggers are developed using parametric rating (SwissRe, 2021). The satellite tracks developing drought conditions during the season, and a payout is triggered when a drought becomes severe. The soil moisture values and payouts can be accessed through an online dashboard which improves transparency in the insurance value chain. Drought is the most important peril that inland farmers are facing in Mozambique. Farmers in the coastal regions are frequently plagued with tropical cyclones that wipe out harvests. Ongoing research and development activities are performed to best capture the impact of cyclones on coastal agricultural land using parametric index insurance.
World Bank (2015), Mozambique: Agricultural Sector Risk Assessment. Risk Prioritization, accessible via: https://openknowledge.worldbank.org/handle/10986/22748
Ministério da Agricultura e Desenvolvimento Rural (MADER) (2021), Inquérito Agrário Integrado 2020, Maputo – MADER, accessible via: https://www.agricultura.gov.mz/wp-content/uploads/2021/06/MADER_Inquerito_Agrario_2020.pdf
Financial Sector Deepening Mozambique (FSDMoç) (2021), Mozambique Inclusive Insurance Landscape Report 2021, accessible via:
Owe, M., de Jeu, R., & Holmes, T. (2008). Multisensor historical climatology of satellite‐derived global land surface moisture. Journal of Geophysical Research: Earth Surface, 113(F1).
Van der Schalie, R., de Jeu, R. A., Kerr, Y. H., Wigneron, J. P., Rodríguez-Fernández, N. J., Al-Yaari, A., ... & Drusch, M. (2017). The merging of radiative transfer based surface soil moisture data from SMOS and AMSR-E. Remote Sensing of Environment, 189, 180-193.
Dorigo, W., Wagner, W., Albergel, C., Albrecht, F., Balsamo, G., Brocca, L., ... & Lecomte, P. (2017). ESA CCI Soil Moisture for improved Earth system understanding: State-of-the art and future directions. Remote Sensing of Environment, 203, 185-215.
Chan, S. K., Bindlish, R., O'Neill, P., Jackson, T., Njoku, E., Dunbar, S., ... & Kerr, Y. (2018). Development and assessment of the SMAP enhanced passive soil moisture product. Remote sensing of environment, 204, 931-941.
Mladenova, I. E., Bolten, J. D., Crow, W. T., Anderson, M. C., Hain, C. R., Johnson, D. M., & Mueller, R. (2017). Intercomparison of soil moisture, evaporative stress, and vegetation indices for estimating corn and soybean yields over the US. IEEE Journal of Selected Topics in Applied Earth Observations and Remote Sensing, 10(4), 1328-1343.
Vergopolan, N., Xiong, S., Estes, L., Wanders, N., Chaney, N. W., Wood, E. F., ... & Sheffield, J. (2021). Field-scale soil moisture bridges the spatial-scale gap between drought monitoring and agricultural yields. Hydrology and Earth System Sciences, 25(4), 1827-1847.
SwissRe (2021), Drought is insurable, accessible via: https://www.swissre.com/risk-knowledge/mitigating-climate-risk/natcat-2019/drought-is-insurable.html