Waiting for rain

By Stephan Faris, Fortune

(Fortune Magazine) -- Problem: Drought relief can be fatally slow getting to stricken areas.

Solution: Weather insurance.

As an Ethiopian, Menghestab Haile knows what drought means. Farmers sell everything to buy food. When the rains return, they have no seeds and no tools. Relief doesn't show up until people are starving. The current system "doesn't respond fast enough," says Haile, a food security advisor for the United Nation's World Food Program. To change that, WFP teamed up with French insurer AXA. If rainfall in northern Ethiopia had been below a certain level this year, a $930,000 premium, funded mostly by the U.S., would have yielded $7 million, payable immediately to the WFP. This year rainfall has been abundant, so there will be no payout. In Mexico and India, where the World Bank subsidizes insurance for small farmers, weather-related coverage has expanded to more than $150 million since programs began in 2002.

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