NIGERIA – Africa Reinsurance Corporation (Africa Re) and the International Finance Corporation (IFC), a member of the World Bank Group, have sealed an agreement to develop agriculture insurance market space in Nigeria.
Under the agreement, Africa Re, a pan-African reinsurance organisation, and IFC’s Global Index Insurance Facility will help Nigerian insurance companies develop agricultural insurance products, and deepen their index insurance business lines.
These index insurance products will help protect farmers against environmental risks such as drought, floods, erratic rainfall and other natural hazards, reports Guardian Nigeria.
The initiative is aimed to trigger innovative and more efficient solutions for small farmers, help them mitigate the effects of climate change-related shocks, protect them against catastrophic losses and access to finance.
The firms believed that the African agriculture insurance market has encountered several challenges that have resulted in the very low penetration levels of this class over the years.
Initially, indemnity-based products were a common feature. However, these products became riddled with high costs of administration and the inherent fraud risks made it difficult for underwriters to implement.
Thus, a parametric solution was sought, specifically to encourage the smallholder farmers to access insurance at affordable terms. This solution is currently being adopted in many African markets.
Speaking on the partnership, Deputy Managing Director/Chief Operating Officer, Africa Re, Ken Aghoghovbia, said, “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.
“We are excited to be partnering with IFC in assisting Nigerian insurers to develop appropriate insurance products for smallholder farmers. This initiative will certainly help move Nigeria towards its goal of food security and it is in line with Africa Re’s mission to support African economic development.”
Meanwhile in Madagascar, farmers stand to build stronger climate resilience, increase productivity, and easily access financial services thanks to an agricultural insurance program announced by IFC and the government of Madagascar.
Under the program, IFC will help Malagasy insurance companies develop targeted insurance products to protect farmers from weather-related risks and other natural disasters that threaten their livelihoods and undermine creditor confidence.
Agricultural insurance will help protect farmers from a wide range of natural disasters, including cyclones, droughts, floods, and pest invasions which cost the country an average of 1 percent of GDP annually.
The project is funded by the Global Index Insurance Facility (GIIF), 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.
GIIF is supported by the European Commission, the African, Caribbean and Pacific (ACP) Group of States, the Netherlands Ministry of Foreign Affairs, the German Federal Ministry of Economic Cooperation and Development (BMZ), and the Japan Ministry of Finance.