Developing the agriculture insurance market in Nigeria has been given a boost as Africa Reinsurance Corporation (Africa Re) and the International Finance Corporation (IFC), a member of the World Bank Group, seal agreement to partner on making it a viable space for insurance companies in the country.
Under the agreement, Africa Re, a pan-African reinsurance organisation, and IFC’s Global Index Insurance Facility will help Nigerian insurance companies 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.
This no doubt will trigger innovative and more efficient solutions for small farmers, help them mitigate the effects of climate change-related shocks, protect them against catastrophic losses and access to finance.
While speaking on the partnership, Deputy Managing Director/Chief Operating Officer, Africa Re, Ken Aghoghovbia, said: “This initiative would certainly go a long way in moving Nigeria towards its goal of food security in line with Africa-Re’s mission to support African economic development.”
“However, we are excited to be partnering with IFC in assisting Nigerian insurers to develop appropriate insurance products for smallholder 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.”
It is believed that the agriculture insurance market in Africa has a lot of challenges that make insurance players shy away from developing products for farmers and other players in the sector. These challenges have resulted in low penetration and participation across the divide over the years. Initially, indemnity-based products were a common feature. However, these products became riddled with high costs of administration and the inherent fraud risks made it difficult for underwriters to implement. Thus a parametric solution was sought, specifically to encourage the smallholder farmers to access insurance at affordable terms. This solution is currently being adopted in many African markets.