by Rosemary Onuoha
Despite that Africa has about 17 per cent of the world’s pastures and arable land, the value of premiums for agricultural insurance in Africa represents less than 0.7 per cent of the world’s total.
The Group Managing Director, WAICA Reinsurance Corporation, Mr. Abiola Ekundayo, who stated this, noted that with climate change negatively affecting farmers’ productivity across the world, especially, in Africa, there is an urgent need for increase in agriculture insurance uptake by players in the agricultural sector value-chain to cover risks that could lead to low farm yield.
Speaking at the WAICA Re International Agriculture Insurance Seminar held in Harare, Zimbabwe recently, Ekundayo noted that the low figure is deplorable when one considers that about 60 per cent of the active population in Africa is working in the agricultural sector and that with the advent of climate change, the risks in agricultural activities are becoming even more frequent and severe.
Ekundayo said, “For smallholder farmers, agriculture insurance offsets risks associated with weather fluctuations. Risk reduction can make it more likely that a farmer will qualify for credit and thus invest in the tools and resources, such as, seed, fertilizer, labour, among others, needed prior to harvest that would potentially increase crop yields.
“Agric insurance provides farmers with the peace of mind required to invest savings into businesses. This also increases their confidence to engage in contracts with buyers and processors.”
Speaking on agricultural microinsurance, he suggested the development of index insurance, an approach that pays out benefits on the basis of a predetermined index, such as, rainfall level, livestock mortality rates, and so on, for loss of assets and investments resulting from weather and catastrophic events, without requiring the traditional services of insurance claims assessors to assess individual losses.
He said, “With the development of new technologies for the management of insurance schemes, such as the adoption of mobile payments, costs have the potential to drop even further.
“As the dynamics regulating claim payments are known to both parties at the onset, index insurance also reduces the information asymmetry between clients and insurers on the risks insured, something that continues to be an issue for classic insurance schemes.”
While calling on commercial and subsistence farmers to embrace Agric Insurance as a form of risk mitigation mechanism, he added that insurance has the potentials to return a farmer, who suffered an insured risk, back to the position he was before disaster struck.