Imperatives of agric insurance under climate change
But climate change is threatening this important industry, as its direct effects include fluctuations in rainfall and variable temperatures, altering growing seasons, changes in planting and harvesting calendars, and difficulties in water availability, among others.
In view of these realities, the Federal Ministry of Agriculture and Rural Development (FMARD) has found it necessary to develop a National Agricultural Resilience Framework that defines a pathway for a better adaptation of Nigerian agriculture to the shocks and stress of climate change.
For the moment, farmers insuring their crops is the new paradigm in developed countries and will now benefit Nigerian farmers, if adopted.
Urging farmers to insure their crops and obtain financial support that will boost their ability to cope in the event of a disaster and contribute immensely to the development of the value chain in the country, operators are scripting policies to suit the needs.
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.
The Group Managing Director, WAICA Reinsurance Corporation, Abiola Ekundayo, who stated this at the WAICA Re International Agriculture Insurance Seminar in Harare, Zimbabwe, noted that though 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.
This remarkably low figure, he said, is deplorable when one considers that about 60 percent 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.
For smallholder farmers, he said, agriculture insurance offsets risks associated with weather fluctuations, adding that, 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.
Stating that Agric Insurance provides farmers with the peace of mind required to invest savings into businesses, he added that, this also increases their confidence to engage in contracts with buyers and processors.
Speaking on agricultural micro-insurance, he suggested the development of index insurance, an approach he said, 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.
With the development of new technologies for the management of insurance schemes, such as the adoption of mobile payments, he said, 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, he pointed out.
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.
The training attracted 64 participants from 14 African countries and was trained on Agriculture insurance in Africa and global outlook, Perils and their impact on agricultural production, Classes of agriculture insurance business – crop, livestock, forestry, bloodstock, aquaculture and greenhouses, Scope of cover and exclusions for the different classes, among others.
The seminar also included an excursion to an agricultural project site to enable participants to have a practical appreciation of the concepts being taught.
Waica Reinsurance Corporation PLC believes in training and the development of human capacity both within the institution and those external to WAICA Re and has conducted various training programmes so far for its cedants based in West Africa and beyond. WAICA Re promises to continue its annual training and development efforts.
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