The Role of Climate Risk and Crop Insurance in Kenya’s Agricultural Future

CAA Blog

Climate Action Africa is playing a role in Kenya for the development of strategies to empower vulnerable women farmers via sustainable finance and mechanization for climate resilience

Counties in Kenya with low-lying, arid, and semi-arid landscapes, marked by unpredictable and unreliable rainfall, significantly contribute to land degradation challenges faced by smallholder farmers. Climate change intensifies these issues, particularly for Kenyan women in agriculture, by heightening vulnerability through disrupted livelihoods, water scarcity, crop failures, and limited access to financing. The existing gender gaps further amplify this unequal burden, as women often lack the resources and knowledge necessary for effective adaptation.

CAA technical experts from the Climate Risk Institute share their story on our blog after a recent deployment to Kenya.

Climate Risk and Crop Insurance in Kenya’s Agricultural Future

By Climate Risk Institute Team: Mark Redwood, Daniel Salau, Nickson Wafula, Peninnah Muthoni and Dilruba Fatima Sharmin

Kenya’s agricultural sector faces rising vulnerability to climate change impacts, including droughts, erratic rainfall, and other climate-related disasters affecting farmers nationwide. The situation is particularly severe in counties like Tharaka Nithi and the northeastern regions, where prolonged droughts threaten livelihoods. Climate risk and crop insurance are seen as essential protections for farmers; however, a recent field visit by the Climate Risk Institute’s technical assistance team, in collaboration with local partner Participatory Approaches for Integrated Development (PAFID), highlighted key challenges that need to be addressed for these insurance solutions to take root in Kenya effectively.

Drought Risks in Vulnerable Counties

Drought risk in counties like Tharaka Nithi and northeastern Kenya has reached critical levels. The increasing frequency and intensity of droughts make climate risk insurance essential. The National Drought Management Authority (NDMA) reports that around 3.4 million people in arid and semi-arid lands (ASALs) face food insecurity, heavily impacting agriculture. Drought insurance products, such as index-based insurance, are being promoted to address this. These products activate payouts based on predefined weather triggers (e.g., rainfall levels), providing farmers with quick compensation when conditions are met. However, challenges remain, particularly in clarifying payout triggers.

One of the critical issues observed is the challenge individual farmers face in accessing insurance payouts. Although crop insurance products exist, many farmers report rejection when claiming payouts. The complex claims process and insurers’ reluctance to cover individuals often leave farmers uncompensated despite substantial losses.

Defining the “Trigger” for Insurance Claims

Another contentious aspect of climate risk insurance in Kenya is the definition of a “trigger” for payouts. With index-based insurance, payouts are typically tied to specific, measurable events, such as rainfall below a certain threshold or temperatures exceeding limits. However, farmers and insurers often disagree on what constitutes an event severe enough to trigger a payout.

For instance, a farmer in Tharaka Nithi may argue that a prolonged dry spell has significantly damaged crops, while an insurer may counter that the rainfall index has not yet fallen below the agreed threshold. Additionally, some ministry officials attribute crop failures to farmer negligence and mismanagement, citing issues like neglecting recommended inputs or delaying essential weeding. These disagreements frustrate farmers and erode trust in insurance products. Another challenge is that national indices may not effectively capture localized droughts or flood events, necessitating a more granular approach to data collection and trigger definition. For example, some insurance companies use 25 sq. km squares as a unit, which may be too broad, as ecological conditions can change drastically even within a 10 km radius.

Importance of Subsidies for Insurers

Insurers in Kenya hesitate to offer crop insurance widely due to perceived high risks. Droughts, pests, and other climate-related events present significant uncertainties, making coverage costly. Consequently, many insurance companies argue that providing crop insurance on a large scale would be financially unsustainable without subsidies.

Subsidies have already proven effective in some instances. For example, under Kenya’s Agricultural Insurance Program, the government provides subsidies to reduce farmers’ premiums for crop insurance. These subsidies enable smallholder farmers to afford premiums on top of the ever-rising farm input costs.

The Gender Dimension: Women and Agriculture in Tharaka Nithi

In Tharaka Nithi County, women are central to the agricultural workforce, often serving as primary caretakers of small-scale farms. Despite their critical role in food production, they face significant barriers in accessing resources like land, credit, and agricultural inputs. This marginalization is particularly concerning under climate change, as women in Tharaka Nithi often bear the brunt of climate-induced risks.

Structural inequalities extend to climate risk and crop insurance, with women in Tharaka Nithi often lacking the financial means to pay premiums due to limited access to formal financial services compared to their male counterparts. Cultural norms may also limit their participation in cooperatives or collective bargaining groups, hindering their ability to pool risks or advocate for fair insurance terms. Furthermore, outreach efforts often target male farmers, leaving many women unaware of available crop insurance. A gender-sensitive approach is essential for including women farmers in climate risk insurance schemes.

Way Forward

To enhance the effectiveness of insurance products for farmers in Kenya, we propose several strategic approaches:

  1. Encouraging cooperative models: Organizing farmers into cooperatives can help individual farmers overcome barriers to accessing insurance and facilitate collective bargaining, which is particularly important for women in agriculture. Cooperatives can act as intermediaries between farmers and insurance schemes, protecting against exploitation and promoting self-regulation.
  2. Expanding government subsidies: Subsidies are essential for making crop insurance affordable and incentivizing insurers to offer products in high-risk areas. Set out a time-bound assessment (i.e., 5 years) to allow for several cycles of crop insurance to be tested.
  3. Improving data collection and indices: More accurate, locally relevant, and timely weather data is needed to define triggers for insurance payouts, thereby reducing disputes between farmers and insurers. Learning from the ILRI-sponsored Index-Based Livestock Insurance (IBLI) program would be beneficial.
  4. Focus on drought-prone areas: Climate risk insurance initiatives should prioritize counties like Tharaka Nithi and northeastern regions, given their high vulnerability to drought.
  5. Design gender-sensitive insurance solutions: Local insurers should collaborate with women’s groups and cooperatives to create products that address specific risks faced by women in agriculture. This may include targeted subsidies to make insurance premiums more affordable, as many women operate on thin profit margins. Educational campaigns to raise awareness about crop insurance among women will also be vital for their participation.
  6. Support capacity-building for insurance products and schemes: Training through agricultural extension agencies and large-scale cooperatives is essential for designing and delivering insurance products. For example, clarifying the terms and conditions will improve understanding among providers and consumers of their rights and obligations, promoting better decision-making and transparency. We propose that third parties, overseen by the Ministry of Agriculture (MOA), explain these products to provide a balanced view of their costs and benefits.
  7. Encourage banks and agro-input companies: They should play an essential role in integrating insurance into their input loan products. Any insurance bundled with loans must be accompanied by clear and transparent coverage explanations (see point 6). Ensuring robust oversight is critical, especially as climate risk insurance develops.
  8. Leverage market influence: Markets can enhance insurance uptake significantly. Large buyers like East African Maltings Limited (EAML) can lead this effort by promoting forward contracting and encouraging the adoption of a single crop variety suited to local environmental conditions. This strategy simplifies supply chains and reduces the challenges of managing diverse crops from numerous small-scale farmers, creating a more predictable environment for both farmers and insurers, thereby increasing insurance adoption rates.

By addressing these challenges, climate risk and crop insurance could transform how Kenyan farmers adapt to the growing risks of climate change. Collaboration among the government, insurers, and farmers is crucial to ensure these tools are accessible, effective, and sustainable.

About Climate Action Africa (CAA) 

Climate Action Africa (CAA), funded by Global Affairs Canada (GAC) and implemented by Alinea, Econoler, and WSP Canada, mobilizes targeted, short-term technical assistance across Sub-Saharan Africa to advance local climate goals aligned with the Paris Agreement. Through the Expert Deployment Mechanism for Climate Action in Africa (EDM-CAA), Canadian climate experts partner with governments, NGOs, civil society organizations, the private sector, and post-secondary institutions to address local needs. CAA supports enhancing climate governance, promoting renewable energy, forest conservation, water resilience, and climate-smart agriculture. With a strong emphasis on empowering women as agents of change, CAA encourages inclusive leadership and South-South cooperation, advancing sustainable climate solutions throughout the region. For more information on the Canadian technical experts, please visit: Climate Risk Institute. More information on PAFID.