The Kenyan government is proposing new rules to protect farmers from the increasing impacts of climate change by requiring insurers to settle claims on weather-related policies within 10 days. The draft regulation focuses on index-based, or parametric, insurance, which pays out based on a predetermined variable such as rainfall, rather than individual claim assessments. The framework aims to ensure that insurance products are fair, transparent, scientifically sound, and that claims are processed promptly.
Weather index insurance, developed in the early 2000s, was designed to help small-scale farmers simplify claims verification and has gained traction globally, particularly in India, Latin America, and the Caribbean, due to rising floods and droughts. Experts have welcomed Kenya’s proposal, noting that delayed payouts have eroded farmers’ trust in insurance and discouraged policy renewals. Faster compensation would allow farmers to reinvest quickly, sometimes even within the same season.
Agriculture remains central to Kenya’s economy, contributing more than a quarter of its output, but farmers face high risks from unpredictable weather, market fluctuations, and limited financial protections. Fewer than 1% of farmers currently have insurance coverage, restricting access to credit and reducing investments in improved seeds, equipment, and technologies. The African Reinsurance Corporation and the International Finance Corporation are working to expand affordable agricultural and climate insurance for smallholder farmers.
Index-based insurance is seen as a key innovation for underinsured communities, although its effectiveness depends on the scale and frequency of climate risks, as well as the financial capacity of the insurance industry. Development aid has historically subsidized insurers in African countries, but recent reductions in funding, such as cuts from USAID, pose new challenges. Most weather index insurance in Kenya has been donor-backed, particularly targeting arid and semi-arid regions.
Experts stress that clarity is needed regarding when the proposed 10-day payout period would begin and how it would be enforced. Accountability for re-insurers is also crucial, as delays often occur when insurers rely on re-insurance during high-risk periods, when farmers need liquidity the most. Proper implementation of these rules could strengthen farmers’ resilience to climate change and encourage greater investment in agriculture.
