Jamaica: Agriculture Ministry and World Bank to Assess Weather-Risk Insurance Model for Coffee Industry

January 26, 2010

KINGSTON, Jamaica, January 26, 2010 – Jamaica’s coffee farmers are now one step closer to effective crop insurance coverage, based on an agreement signed today by Agriculture Minister, Dr. the Hon. Christopher Tufton; Coffee Industry Board Director General, Mr. Christopher Gentles; and World Bank Senior Agriculture Economist, Mr. Diego Arias, to conduct a feasibility study for the introduction of a weather-risk insurance scheme for the coffee industry.

Speaking at the ceremony held at the Ministry’s headquarters this morning, Dr. Tufton said “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 as demonstrated by the losses experienced by the sector between 2004 and 2007, amounting to some $13.47 billion, with coffee accounting for $51 million 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, as 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.

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.

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 destabilized the industry as they have caused declining productivity and crop damage.

Agriculture has a key role to play in enhancing food security and reducing poverty,” said Mr. Arias. “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,” he added.

Under the agreement signed today, 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 Program.”

The project will include the following activities:

  • Conducting weather-risk modeling and quantification.
  • Assessing different insurance options based on the technical findings.
  • Creating a weather insurance prototype product.
  • Designing the scheme’s administration and premium collection payouts.
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