Expert Meeting – Requirements of Weather Markets WMOExpert Meeting – Requirements of Weather Markets WMO

December 5,December 5, 2007 2007 Ulrich Hess, Chief of Business Risk PlanningUlrich Hess, Chief of Business Risk Planning

WFP InitiativesWFP Initiatives

AGENDAAGENDA

• WFP & WFP Strategy

• Initiatives– WFP/IFAD partnership

• China

• Global Weather Risk Market Making

– Ethiopia Phase II

WFPWFP

RESPONSE IN EMERGENCIES

CORE TARGETED PROGRAMMES

HAVING THE BEST ANALYTICAL AND OPERATIONAL TOOLBOX AVAILABLE

HANDING OVER TO PARTNERS

TRANSFERRING SKILLS AND KNOWLEDGE TO COUNTRIES

INVESTING IN PREVENTION

PRECURSOR EFFORTS FOLLOW ON EFFORTS

PARTNERSHIPS

operations in 78 countries

Budget of USD 2.9 billion88 million people assisted4 million tonnes of food

ETHIOPIA PHASE IIETHIOPIA PHASE II

Occ

urr

ence

(n

o. o

f ye

ars)

0

2

4

6

8

10

12

14

16

18

0 0 0 0 30 60 90 120 150 180

Early Livelihood protection costs ($US million)

Num

ber

of y

ears

by

drou

ght s

ever

ity

CATASTROPHIC DROUGHTMILD DROUGHTNO DROUGHT

0

2

4

6

8

10

12

14

16

18

0 0 0 0 30 60 90 120 150 180

Early Livelihood protection costs ($US million)

Num

ber

of y

ears

by

drou

ght s

ever

ity

CATASTROPHIC DROUGHTMILD DROUGHTNO DROUGHT

Drought severity – Early Livelihood Protection costs (Mil Euro)

InsuranceContingency Grant/Fund/WFP CEMOP

Flash AppealProductive Safety Net

7.3 Mil Safety Net Beneficiaries 6.7 Mil Livelihood Protection Target Beneficiaries

WFP/IFAD GLOBAL WEATHER WFP/IFAD GLOBAL WEATHER RISK MARKET MAKINGRISK MARKET MAKING

• Core team of Experts & Market Makers

• Create Global and national public goods that enable weather risk markets– Weather Data (real time+historical) & Weather

Data Infrastructure– R&D– Technical Assistance for demonstration projects

• Crowd in Weather Risk Takers

Support LevelsSupport Levels

Vision: From small contracts…Vision: From small contracts…

…….for small farmers….for small farmers…

……to large safety net contracts…to large safety net contracts…

Occ

urr

ence

(n

o. o

f ye

ars)

0

2

4

6

8

10

12

14

16

18

0 0 0 0 30 60 90 120 150 180

Early Livelihood protection costs ($US million)

Num

ber

of y

ears

by

drou

ght s

ever

ity

CATASTROPHIC DROUGHTMILD DROUGHTNO DROUGHT

0

2

4

6

8

10

12

14

16

18

0 0 0 0 30 60 90 120 150 180

Early Livelihood protection costs ($US million)

Num

ber

of y

ears

by

drou

ght s

ever

ity

CATASTROPHIC DROUGHTMILD DROUGHTNO DROUGHT

Drought severity – Early Livelihood Protection costs ($US Mil)

InsuranceContingency Grant/Fund/WFP CEMOP

Flash AppealProductive Safety Net

8.3 Mil Safety Net Beneficiaries 7 Mil Livelihood Protection Target Beneficiaries

……protecting vulnerable protecting vulnerable households!households!

HENCE: LARGER SHARE OF HENCE: LARGER SHARE OF NON-OECDNON-OECD CONTRACTSCONTRACTS….….

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2000/1 2001/2 2002/3 2003/4 2004/5 2005/6 2006/7

Other

Europe

Asia

NA South

NA East

NA Mwest

NA West

Distribution of total number of contracts by region 2000-2007

2008-2011

……AND SIZABLE NON-OECD MARKETS!AND SIZABLE NON-OECD MARKETS!

$0

$5'000

$10'000

$15'000

$20'000

$25'000

$30'000

$35'000

$40'000

$45'000

$50'000

2000/1 2001/2 2002/3 2003/4 2004/5 2005/6 2006/7

CME Winter

CME Summer

OTC Winter

OTC Summer

2008-2011

ChinaChina

• GoC/IFAD/WFP Weather Index Insurance Feasibility Study–Flood Index based Protection

–Drought Index Insurance

• Demonstration and replication effects

CONCLUSION: Weather Index CONCLUSION: Weather Index based risk transfer is based risk transfer is

important....important....• Destitution

• Dignity

• Risk financing Cost

• Climate Change

THANKS!THANKS!

• Ethiopia LEAP Tool download:

http://vam.wfp.org/LEAP

Free software download. Please do not distribute without consent of WFP and World Bank

• For questions: ulrich.hess@wfp.org,