A major effort that would boost agric insurance contribution towards food sufficiency in Nigeria has been recorded with signing of a partnership deal between IFC, a member of the World Bank Group, and Africa Re, a pan-African reinsurance company headquartered in Nigeria.
The partnership will help thousands of smallholder Nigerian farmers to easily access insurance to protect their crops and livelihoods, having benefited 75,000 farmers with $6.7 million financing in one year of operation.
Under the agreement, Africa Re and IFC’s Global Index Insurance Facility will help Nigerian insurance companies licensed by Nigeria’s insurance regulator, NAICOM, 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.
Index-based agricultural insurance, which pays out based on transparent parameters like rainfall and does not require costly field visits to verify losses, is an innovative and efficient way for farmers to protect themselves against losses.
Ken Aghoghovbia, Africa Re’s deputy managing director/chief operating officer, said, “We are excited to be partnering with IFC in assisting Nigerian insurers develop appropriate insurance products for small holder 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.”
Eme Essien, IFC country manager for Nigeria, said, “IFC’s support for affordable and accessible agricultural insurance will help Nigeria’s farmers mitigate the effects of climate-related shocks, protecting them against catastrophic losses and unlocking access to finance. Developing a sustainable agricultural insurance industry also requires a strong commitment from regulators, such as NAICOM, who embrace innovation to help farmers manage their risks.”
Farmers with crop insurance are also more likely to access other financial products, including credit, and to invest in higher quality production inputs.
However, the traditional insurance market has largely failed to meet smallholder Nigerian farmers’ demand for affordable insurance with its high premiums and transaction costs.
IFC’s and Africa Re’s specific support to insurance companies will include helping them design specialized insurance products and develop digital platforms, so that farmers can easily view and compare index insurance offerings from various providers. IFC and Africa Re aim to provide thousands of farmers with access to insurance by the end of 2020.
The Global Index Insurance Facility (GIIF) is a multi-donor program that was created to address the scarcity of affordable insurance protection against weather and catastrophic risks in developing and emerging countries. Its main objective is to promote the development of effective and sustainable markets for index-based weather and catastrophic risk insurance in such countries.
The facility is part of the World Bank Group’s Finance, Competitiveness, and Innovation Global Practice and is funded 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.
