Africa-Re, IFC Partner To Provide Insurance Solution For Small Farmers
Africa-Reinsurance has IFC (A member of the world bank group) to provide technical support to insurance companies for their agricultural line by using index-based agricultural insurance.
Speaking on the partnership, both organisations stated that the partnership which took place in March 2019, will trigger innovative and more efficient solutions for small farmers, help them mitigate effects of climate change related shocks, protect them against catastrophic losses and access to finance as well as offer technical support to insurance companies for their agricultural line by using index-based agricultural insurance.
The Deputy Managing Director/COO, Africa Reinsurance Corporation, Ken Aghoghovbia expressed optimism for the success of the initiative.
“This initiative would certainly go a long way in moving Nigeria towards its goal of food security in line with Africa-Re’s mission to support African economic development.
“The African agriculture insurance market has encountered several challenges that have resulted in the very low penetration levels of this class over the years, including high premium rates, high volatility of net account results for risk carriers, low institutional capacity and limited reinsurance capacity.
“In order to address these challenges that have impacted the expansion of agriculture insurance solutions in Africa, the IFC’s Global Index Insurance Facility (GIIF) set up an experience account whereby the loss ratios of the net account for local risk carriers would be capped at 75 per cent and the excess loss amounts transferred to the Global Index Insurance experience account. African Reinsurance Corporation acts as the fund administrator.
“The GIIF is a multi-donor program managed by the World Bank Group created to address the scarcity of affordable insurance protection against weather and catastrophic risks in emerging countries. The pilot phase of the experience account was set up in 2017 for a three-year period to end in December 2020. The $900,000 fund covered Nigeria and Zambia and was intended to support the development of weather and area yield index insurance programs in these countries.
“During the last three years, the experience account fund has been triggered twice – in 2019 and 2020. In 2019, two risk carriers, Mayfair Insurance Company (Zambia) and AXA Mansard Plc (Nigeria) benefitted from the fund following various flood losses that impacted their net account portfolios.
“In 2020, the Nigeria market was again hit by flood losses that affected eight local risk carriers on the CBN Area Yield Index Anchor Borrowers Program (Wet Season) for rice, maize and cotton crops. The total market gross claim was NGN1,995,487,009; approximately $5 million and the local insurers that covered the risk included Veritas Capital, Leadway Assurance, AIICO Insurance, AXA Mansard Insurance Plc and Royal Exchange Insurance Plc.,” he stated.
He said with the increasing number of agriculture risk carriers as well as smallholder farmers in need of insurance, coupled with the climate change impacts stemming from erratic climatic conditions worldwide, the future of agriculture and hence food security in Africa is uncertain, noting that “It is obvious that the need for wider incentive programs such as the GIIF experience account will be key parameters in mitigating challenges associated with these anticipated scenarios in the future.”
