Insurers, IFC and push for multi-billion naira agric cover


Agriculture in Nigeria is a critical aspect of the nation’s economy, providing direct employment for about 30 percent of the population, while the sector contributes about 24 percent to the Gross Domestic Product, according to the Nigerian Bureau of Statistics. 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) said it is 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 has become the new paradigm in developed countries and will 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.

To harness this huge potentials of the nation’s agriculture sector, African Reinsurance Corporation and International Finance Corporation (IFC) have continued to play major role in capacity building for insurers underwriting agriculture business.To effectively prepare underwriters for businesses in the agriculture space, African Reinsurance Corporation and IFC organised a workshop on December 2, 2019, in Lagos.

According to them, the contents for the workshop were structured based on the market needs and 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 optimism that with such workshop, within the next two years, the challenges facing the Nigerian insurance industry 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, posited that since the launch of the Nigeria Index Insurance programme, the company, in collaboration with IFC, has initiated various activities in the market to achieve its key objectives.

He noted 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 kicks 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, stressing that 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 fourteen 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, IFC, Shadreck Makumo, urged agriculture 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 said.He implored insurers present at the conference to embrace best practices and avoid cutting corners, especially, in the area of product pricing, predicting a great potential for agriculture insurance in the Nigerian market. He called on stakeholders in the agriculture 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 insurance contract.

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

Stating that 90 percent of Nigerian land is arable, he regretted that only 42 percent 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.

Calling for more investors to invest in large scale farming, he believes 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, he pointed out, is a risky business, saying that its insurance remains the best risk-coping mechanism that must be subscribed to by all farmers, either on subsistence or commercial basis. He urged agriculture insurers to leverage on technology and pay claims to farmers.

Highlighting the benefits of agriculture insurance, he said, the policy cushions the shock of disastrous losses by assuring farmers of paying claims when an insured risk occurs on their farms.As agriculture income is an important factor in national income, he said crop insurance also has an effect on the prosperity of the country, even as insurance gives farmers greater confidence to the farm.

Moreover, Duncan Mukonyi of Africa Re, charged underwriters to enlighten policyholders on what their policies cover at the point of insuring so that the insured is aware of the policy he or she is purchasing.The current negative insurance perception, he said, was because most policyholders did not really understood the cover they bought, while insurers too were in a hurry to take premium, hence, did not explain in details the terms and conditions of the product to the insured.He urged operators to be open and take their time to explain policy wordings to intending policyholders on what a policy covers instead of having a dispute at the point of claims settlement.

In this article:
FMARDIFCKen Aghoghovbia
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