Israel Muchena is Managing Director of Life & Agricultural Insurance at Hollard Mozambique.

Israel Muchena was enjoying life in Mauritius. It was 2015, and he had recently left his native Mozambique. His employer, Hollard Mozambique had decided not to pursue agricultural insurance following an initial pilot. But then he received a call from his former boss: An American university research team had some new ideas that might make an index insurance offering more successful. Would Israel consider returning to see if they could pave a way forward?  

He did return and began collaborating with a team from the Feed the Future Innovation Lab for Markets, Risk and Resilience. From 2015 to 2018, the MRR Lab team designed and tested a bundle of stress-tolerant maize varieties developed by CIMMYT and agricultural index insurance that provided a seed-replacement guarantee. The researchers found that the insurance was effective in offsetting the long-term consequences of severe yield losses that were not mitigated by the drought tolerant seeds.

The project was transformative for Hollard Mozambique, which  continues to grow its agricultural insurance portfolio. The MRR Lab is no longer working directly with Hollard on the insurance product, but continues to study farmer learning, uptake, and impact of the bundle. 

In this Q&A, we talk with Israel about his experience working with an academic research team.    

Some might imagine that a team at a university on the other side of the world would be removed from the local reality, instead focusing on theory. How would you describe your experience collaborating with the MRR Lab?  

It depends very much on the group of researchers that you’re working with and the research methodology that they’re following. Often, business and academics carry on in parallel streams. But depending on how you set up the relationship from the beginning, it can be a highly rewarding interaction. We are not looking out at the latest research, latest theory and refining our thinking. So it helps to have somebody coming from that space saying, “This is the newest thinking.” But we can also help refining the theory by questioning and interrogating some of their assumptions. So for us, it's been a very healthy interaction.

Hollard had previously given up on agricultural insurance. What was the value from UC Davis researchers that turned this around?

Reaching last-mile customers was a major obstacle for us. Mozambique is a large country and we have only four offices. Farmers are dispersed over a large area with poor transportation infrastructure; some areas are inaccessible during certain times of year, and conflict in some areas makes travel even more difficult. The MRR research team brought the ideas that we can work with agrodealers, that seed companies can be our aggregators. These are not traditional distribution channels for insurance. They have also helped to train the agrodealers as remote insurance agents.

The partnership also connected us with the agronomic innovation of drought-tolerant seeds, which we combined with the financial innovation of the index-based insurance. We think of the drought-tolerant seed as a built-in deductible, in that it covers farmers from some low-impact, high-frequency losses of dry spells—while the insurance covers them in case of a low-frequency, high-impact event of an extreme drought. We have also learned a lot about seeds from the MRR team that we are applying in the rest of the region.

We also worked with the MRR researchers in refining our index. In our 2012 pilot, we had used a combination of rainfall and temperature, and the index triggered payouts of 2.7 times the value of premiums received. With MRR researchers, we looked at different types of indices and learned we shouldn’t limit ourselves to only one model. With MRR, we applied the vegetation index in addition to rainfall. And with another research team we were exposed to moisture index. We have also learned with researchers about the importance of ground data, so we can try to understand how well our indices are reflecting the conditions farmers are facing.

What else would you like to share with our readers? 

I see many actors in this space over-focusing on headcount of number of people enrolled. The work we’re doing through agrodealers to really educate a smaller number of subscribers is harder than that of programs that enroll huge numbers who don’t really understand what they’re signing up for. But there is a lot more sustainability if we get it right. We are building critical infrastructure and learning valuable lessons that can be replicated.

Mozambique is one of the most vulnerable countries to extreme climate events. Given the importance of agriculture to the country’s development, can we do more to protect vulnerable farmers? I see schemes that are extractive and transfer risk to the weakest party, the farmer. A monopsony company makes contracts with smallholder farmers, asking them to pay for inputs during the hungry season, and then farmers are exposed to losses, including changes in international market prices. I would like to see companies finance the risk of losses that are out of the control of the farmer. We will not be able to succeed unless there is transformation of the agricultural sector, which is currently highly extractive.