MODERATOR: Panos Varangis (Global Lead, Agricultural Finance and Disaster Risk Finance, WBG)

SPEAKERS: Pape Ndiaye (CEO, CNAAS Senegal); Bhargav Dasupta (MD & CEO, ICICI Lombard General Insurance); Christina Ulardic (Head of the Market Development Africa, Swiss Re Corporate Solutions); Rose Goslinga ((Insurance Sales, PULA); Lourdes del Carpio (General Manager of agricultural insurance, La Positiva insurance company)

“If you had a house which was completely empty, would you buy a lock? And now, what if you had a flat screen TV inside your house?” This is with this image that Rose Goslinga, introduces the two expected benefits of agriculture insurance: on the one hand, insurance can protect farmers in bad years (the “lock”), and on the other hand, insurance can foster productive investments (the “flat screen TV”) through enhanced access to credit and incentives to invest. Recent studies have shown that access to insurance can act as a catalyst to boost farmers’ income and, according to Rose Goslinga, this is what farmers need the most: access to credit, access to quality and timely inputs, and access to markets.

Christina Ulardic from Africa at Swiss re, one of the largest global reinsurers, agrees: “Insurance alone doesn’t do it”. She highlights the need to leverage key stakeholders along the agriculture value chain - such as financial institutions, but more particularly agribusinesses – to sell insurance as part of a productive package. However, even when bundled with other value-added products and services, and with the exception of a few established programs (in India or Mexico for instance) most agriculture insurance programs reach only a few thousands farmers.

So what can Governments do to support sustainable scale-up of insurance markets? Experiences from Senegal, India and Peru show that there is a wide variety of Government interventions to support agriculture insurance:

In Senegal, Pape Ndiaye indicates that Government support has been crucial on three fronts: support to the creation of CNAAS (35% of CNAAS is owned by the Government), 50% premiums subsidies and insurance tax exemptions. But as most of the 500,000 Senegalese farmers are still uninsured, he indicates that “more remains to be done”. In particular, he insists on the need to create insurance awareness, linkages to credit, data infrastructure, and enhanced insurance and reinsurance capacity.

India is the birthplace of index insurance with the first pilot launched by ICICI Lombard in 2003 and is now home to the biggest agriculture insurance market with 26 million farmers insured. Such “scale-up” has been possible thanks to strong Government support both on the demand side (e.g. premiums subsidies, mandatory bundle of insurance with rural credit) and the supply side (e.g. investments in data collection). But again, more remains to be done as looking in relative terms, this accounts for 20% of farming households.

In Peru, the Government has opted for a segmented approach: on the one hand, “catastrophic insurance” is highly subsidized and acts as a safety net for vulnerable farmers, and on the other hand un-subsidized insurance is sold through microfinance institutions (MFIs) to commercial farmers. Farmers covered under the subsidized scheme are 10 times as numerous as under the unsubsidized one. “For farmers it was a drought, but for the insurer it was just a dry spell”.

The 6 key lessons learnt that emerge from the panel are as follows:

1. Insurance needs to be part of a value add package that generates higher income for the farmers;
2. Governments play a key role in creating markets for agricultural insurance.  Experiences in Peru, India and Senegal point to government interventions such as premium support, risk financing, and linkage to credit;
3. There is a need to design and offer the right insurance product.  Area Yield Index Insurance may offer an adequate protection to farmers as it captures a wider range of perils than pure Weather Index insurance;
4. Data is critical but it is not necessarily a precondition for insurance projects. Experience from Peru shows that data availability and reliability can be improved throughout the course of a project; 
5. Insurance may not always be the solution for the problem of climate change, and should be explored as part of a broad risk management framework. Agriculture insurance can help the transition to climate smart agriculture by securing investments in adaptation. In addition, by quantifying and mapping risks, insurance can also act as a catalyst for adaptation investments;
6. When it comes to index insurance, Knowledge often flows from South to North.