The following is taken from an article written by Stephan Faris in Time magazine (24 Sep 2012):
The idea [crop insurance] is simple. Instead of relying on food aid to help farmers after a drought has hit, aid agencies can sign them up for crop insurance before the disaster strikes. When the rain fails, a farmer can use a crop-insurance payout to buy food without dipping into the assets needed for the next planting. “It allows you to smooth out your income,” says David Waskow, director of the climate-change program at Oxfam America, which is coordinating the project. “Otherwise they can fall off a cliff.”
[Oxfam’s] project in Ethiopia is the latest step in the insurance industry’s long fight to build a business case that accounts for global warming. . . It’s crop insurance program, which covers about 13,000 households, allows rich countries to pick up the tab for the damage their emissions cause. The premiums are paid by international donors via the World Food Programme. In exchange, the recipients are required to pitch in on public works that will help their communities cope with wilder weather: digging retention ponds, terracing fields, building dams. In Ethiopia, farmers work an average of two weeks a year to pay their share of the premium. . . .
There’s a limit to what insurance can do. U.S. taxpayers spent $9 billion last year to subsidize crop insurance–support that critics say encourages the use of poor land. If drought becomes a regular feature in northern Ethiopia, crop coverage could become nothing more than a byzantine channel for sending more aid. . . .