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Insuring Africa's Farmers Against Weather Risks
IFC has conferred millions of dollars in performance-based grants and contracts to help extend weather insurance to tens of thousands of farmers in Africa, protecting them from natural disasters and weather-related risks that can destroy their livelihoods at a stroke.Through its Global Index Insurance Facility (GIIF), IFC is helping to bring affordable, index-based insurance protection to developing countries and emerging markets, where uninsured farmers and herders often struggle to recover from storms, floods or droughts.
Under an index-based insurance scheme, losses resulting from weather and catastrophic events are assigned values on a pre-defined basis, using an index.
This innovative approach to insurance provision means that policyholders qualify for pay-outs as soon as the statistical indexes are triggered, without having to wait for claims to be settled in the traditional way. Insurance will pay out if the index is triggered, irrespective of the actual loss.
Index-based insurance reduces moral hazard and adverse selection, ensures timely payout, reduces administrative costs, and provides a standardized and transparent structure.
$10 Million in Commitments
Since its launch in December 2009, GIIF has conferred six grants in Africa on foundations, insurers, and microfinance institutions with commitments of almost $10 million. These grants are helping expand access to insurance to farmers in Kenya, Rwanda, Mozambique, and in francophone West Africa, places where agriculture is fundamental to economic growth, poverty reduction, and job creation.
Based on the early success of its current projects, GIIF is looking to expand its support into Ghana, Tanzania, Zambia, and other countries in Africa. The weather-insurance program is also looking at backing farmers in Latin America and the Caribbean, South Asia, East Asia and the Pacific, with recently approved projects for Bangladesh and Sri Lanka.
The European Commission and the ACP Secretariat are the primary donors to the GIIF Trust Fund and have committed 24.5 million euros to help it reach its objectives. The fund is also supported by Japan’s Ministry of Finance, with an initial grant of $2 million, and the Dutch Ministry of Foreign Affairs, which provided $500,000 to establish the facility.
Following are details of GIIF’s six partnerships in Africa:
UAP Insurance / Syngenta Foundation:
The Kilimo Salama (“Safe Agriculture” in Kiswahili) is an index-based insurance product that covers Kenyan farmers in the event of drought or excessive rainfall. It was developed by the Syngenta Foundation for Sustainable Agriculture and launched in partnership with Kenya’s largest mobile network operator, Safaricom, and UAP insurance. In November 2010, IFC provided a performance-based grant of $2.4 million to the Syngenta Foundation to help it develop an SMS system that delivers insurance information directly to farmers’ mobile phones. During the pilot phase of the project in 2009, 200 farmers were insured. By June, 2011 that number had increased to 19,000, easily on target to reach 30,000 low-income farmers in Kenya by the end of 2012.
MicroEnsure:
The MicroEnsure Index Insurance Initiative aims to bring weather insurance to roughly 24,000 low-income farmers in Rwanda by the end of 2013. MicroEnsure has partnered with Opportunity International and the Hollard Insurance Group to reach low-income farmers with flexible, affordable and responsive weather index insurance. GIIF is supporting the initiative with a performance-based grant of about $1.6 million. As of February, 2011, 935 farmers were protected by insurance. Project partners had also delivered three training workshops, trained nine insurance practitioners, and 88 microfinance staff, including bank personnel and dealers on index insurance.
ILRI:
Index-based livestock insurance (ILRI), in collaboration with Cornell University, the BASIS Research Program (University of Wisconsin-Madison) and Syracuse University, have designed and developed index-based insurance products to protect Kenyan pastoralists from losses caused by drought. GIIF’s performance-based grant of about $154.000 will help keep the price of insurance low so more farmers can afford it. The insurance contract will cover the Marsabit District in Northern Kenya. By June 30, 2013, the project expects to help insure 36 percent of Marsabit district households (10,800) and 24 percent of total livestock head (28,800 cattle, 240,000 sheep and 18,240 camels) in Marsabit and surrounding against drought.
PlaNet Guarantee:
The goal of the project is to develop and implement an index-based insurance product that will cover different agricultural crops against a variety of risks in Benin, Burkina Faso, Côte d’Ivoire, Mali, Niger, Senegal and Togo. GIIF’s performance-based grant of $2.4 million will help PlaNet Guarantee design new and affordable index-based insurance products; develop an effective distribution network that expands outreach to low income farmers; and scale up agricultural index insurance into a commercially viable and sustainable product. By August, 2013 the projects expects to help insure 40,000 farmers.
Guy Carpenter:
The project aims to develop and market flood and drought index-based insurance products in Mozambique through a consortium of three members: Guy Carpenter, the lead implementation partner providing risk management solutions and strategies to the property and casualty insurance industry; Risk Management Solutions (RMS) developing models for natural catastrophes; and RMSI providing hazard maps and software tools in disaster management. GIIF has conferred a performance-based grant of $1 million to support the project, which expects to help insure 50,000 farmers by March, 2013.
GIIF Technical Partnership with Swiss Reinsurance
GIIF has partnered with the Swiss Reinsurance Company to develop insurance products for rural Africa and other emerging markets. Swiss Re will provide technical services to GIIF projects, supporting them with its experience in developing innovative, risk-transfer solutions for emerging markets. $2.4 million grant
For more information contact:
Jason Hopps
Communications Officer
Johannesburg, South Africa
Phone: +27 11 731 3120
E-mail: jhopps@ifc.org
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