Africa Reinsurance partnership with IFC (A member of the World Bank Group) is committed to providing technical support to insurance companies for their agricultural line by using index-based agricultural insurance in Nigeria.
A statement on Thursday said that the partnership would 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.
It stated that to address these challenges that had impacted the expansion of agriculture insurance solutions in Africa, the IFC’s Global Index Insurance Facility set up an experience account where, 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.
Part of the statement read, “African Reinsurance Corporation acts as the fund administrator.
“The Global Index Insurance Facility is a multi-donor programme 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 Group of States, the Netherlands Ministry of Foreign Affairs, the German Federal Ministry of Economic Cooperation and Development, and the Japan Ministry of Finance.”
It stated that the pilot phase of the experience account was set up in 2017 for a three-year period till 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, it added.
It stated that the benefits of the experience account to the index insurance portfolios could not be overemphasised.
The statement said that this included protection of risk carriers net accounts from adverse loss scenarios whereby they could recover monetary amounts from the fund facility in the event their loss ratios exceeded 75 per cent, however capped at some monetary limit.
It added that it included motivation for risk carriers to continue writing agriculture businesses as they knew they had some cushion in the event of a bad year.
This, it added, had resulted in an increased number of licensed agriculture underwriters since 2017.
It noted that in Nigeria, the number of licensed underwriters had grown from four in 2017 to 15 in 2021.
According to the statement, there was motivation for risk carriers to provide fairly affordable prices to small holder farmers as well as tailor made products that are attractive.
Smallholder farmers could therefore easily access insurance, it added.