Africa Re, IFC Build Capacity, Deepen Penetration Among Farmers

The disasters that befall the farmers have serious adverse effects on the financial position of the nation. Omobola Tolu-Kusimo writes on how African Reinsurance Corporation and International Finance Corporation (IFC) are working to curb the trend.

Agriculture remains the only means of ensuring food sufficiency in any country, Nigeria inclusive. But it has always been a risky business as it is subject to the vagaries of nature. This is why insurance is crucial to the success of agriculture business.

But majority of Nigeria farmers are not covered by any form of insurance. Low insurance penetration among farmers is on the rise with many losing their plantations daily.

According to the National Insurance Commission (NAICOM), only about 75,000 farmers are covered by any form of insurance in the country despite the large number of farmers which runs into millions.

Expert have, however, said that the insurance sector has been lagging behind in the coverage of agriculture insurance.

Determined to harness the immense potentials of the nation’s agriculture sector, African Reinsurance Corporation and International Finance Corporation (IFC) have started playing major role in capacity building for insurers underwriting agriculture business.

Last week, African Re and IFC organised a workshop in Lagos. According to them, the contents for the workshop were based on the market needs. The workshop provided an opportunity for insurers in attendance to be tutored on topics such as: Price Index; Digital Solutions in the Agriculture Insurance Space and Practical Crop Cuts Methodology which includes a physical farm visit.

The organisers expressed optimisim that with such workshop, within the next two years, the challenges facing the Nigerian insurance sector in the implementation of agriculture index insurance contracts to farmers will be a thing of the past.

The Deputy Managing Director/Chief Operating Officer, African Reinsurance Corporation, Ken Aghoghovbia while speaking at the ongoing event said that since the launch of the Nigeria Index Insurance programme, African Reinsurance Corporation in collaboration with IFC has initiated various activities in the market to achieve the key objectives of the programme.

He stated that in order to adequately address the pain points of stakeholders in the agriculture insurance space, Africa Re and its partner reached to clients individually to collate their needs, adding that one of it turned out to be the ongoing five-day technical workshop that kicked off since Monday.

He said: “The IFC/GIIF fund which Africa Re manages on behalf of the Nigerian agriculture industry stakeholders aligns with the founding mission in addressing the industry challenges. Africa Re supported by its partners will continue to work with IFC to provide solutions to the Nigerian agriculture industry by assisting in providing adequate reinsurance capacity, training, digital solutions and product development.

“The good news is that Nigeria still has immense economic potential and thanks to the Federal Government initiatives that triggered the 2012 Agricultural Transformation Agenda and set the ball rolling for the insurance industry to tap into this opportunity, through provision of affordable insurance products to farmers whilst at the same time guaranteeing food security.

“Since then, Africa Re’s role as the largest reinsurer in Africa has been put to test with the need to provide adequate reinsurance capacity to the Nigerian insurance industry, a feat that has seen the number of approved agriculture underwriters increase to 14 as of today. Initially, agriculture insurance products in Nigeria were provided on indemnity basis with the attendant high costs of administration and inherent risks of fraud. Thus Nigerian underwriters over the years have faced challenges in the implementation of indemnity based insurance contracts, a turn off to insurance penetration. In an attempt to address the challenges posed by indemnity products, underwriters sought to introduce index insurance in Nigeria,” he said.

Senior Financial Sector Specialist, International Finance Corporation (IFC), Shadreck Makumo, urged agric insurers not to promise farmers what they knew cannot be covered as this can lead to conflict when claim arises.

“Don’t promise what you cannot cover to your clients, so that, you don’t end up giving excuses at the point of claims payment. Such fake promise, if not fulfilled, could make the farmer nurse the belief that underwriters don’t pay claims and that, when such information is circulated among the people, it creates a negative image for the entire Insurance industry”.

He urged agric insurers present at the conference to embrace best practices and avoid cutting corners, especially, in the area of product pricing, he foresees a great potential for agric Insurance in the Nigerian market.

He called on stakeholders in the agric space to work harmoniously, while urging farmers and insurers to abide by the tenets of utmost good faith by embracing total disclosure during buying and selling of agric insurance contract.

Delivering his paper on: ‘Risk Management & Insurance in the Agriculture Value Chain’, Erastus Ochieng of Africa Re, said 30 per cent of Nigerians directly depends on agriculture, although, there are more small and medium scale farmers, while large scale farmers are rare.

Stating that 90 per cent of Nigerian land is arable, he regretted that only 42 per cent of it is currently in use, calling on Nigerians to prioritise agriculture, especially, as the world is gradually transiting from oil, which is Nigeria’s main revenue generating avenue, to other alternatives.

“There is need for more investors to invest in large scale farming. The country has a lot of potentials in agriculture with about 48 per cent of its arable land yet to be used, while it has a consuming market of about 200 million people. Agriculture is a risky business and insurance remains the best risk coping mechanism that must be subscribed to by all farmers, either on subsistence or commercial basis.

“Agric insurers also need to leverage on technology to insure and pay claims to farmers. Agriculture insurance policy cushions the shock of disastrous losses by assuring farmers of paying claims when an insured risk occurs on their farms.”

 

Source: The Nation