The article recently published by the Africa Reinsurance Corporation in their latest magazine edition underscores the pivotal role of the public sector in fostering the development and expansion of agricultural insurance, particularly in developing countries. It highlights the challenges faced by the agricultural sector, such as pest infestations, adverse weather conditions, and climate disasters, and how these risks threaten the sustainable development of agriculture. Despite the growth of agricultural insurance, particularly index-based policies, coverage remains limited and heavily skewed towards China and India. In this interview, Fatou Assah (Global Head Advisory Services, Financial Institutions Group, IFC) emphasizes the need for robust regulatory frameworks, reliable data access, and capacity-building initiatives to enhance the scalability and sustainability of agricultural insurance programs.

Key Points:

Regulatory Framework: Government regulation is essential to ensure healthy competition in the insurance sector. Regulatory bodies like the Inter-African Conference of Insurance Markets (CIMA) in Africa play a crucial role in setting standards and adjusting premium rates to make insurance schemes profitable for the private sector while remaining affordable for policyholders.

Access to Data: Reliable weather data is critical for developing index insurance products. Governments should invest in improving data collection and processing, leveraging global and regional centers that offer climate and weather data. Innovations like CHIRPS, developed with the USGS EROS Center, provide comprehensive data for early warning systems and drought monitoring.

Capacity Building and Awareness: Strengthening the capacities of agricultural producers and their organizations is vital. Comprehensive training programs and awareness initiatives can help farmers understand the benefits of agricultural insurance and overcome their distrust of insurers.

Technological Integration: The adoption of advanced technologies, such as satellite imagery and AI, is crucial for expanding insurance access and improving data gathering. Companies like Pula and Descartes Underwriting are revolutionizing insurance for climate-impacted communities.

Smart Subsidy Design: Subsidies should be strategically implemented to encourage higher uptake of agricultural insurance without causing market distortions. The focus should be on catastrophe layers to minimize distortions.

Climate Adaptation Planning: Governments should lead in climate adaptation efforts by investing in localized data intelligence and regional planning, using insurance as a tool to mitigate the impact of climate crises on rural farming populations.

Public-Private Partnerships: Collaborations between the public sector, reinsurers, and private insurers are essential for developing innovative solutions and expanding the reach of agricultural insurance.

Coupling Agricultural Insurance with Other Services: Bundling insurance with other products and services, such as agricultural inputs and credit, can make insurance more attractive and accessible to farmers.

The public sector's active involvement is crucial for developing a resilient agricultural insurance ecosystem. By focusing on regulation, data access, capacity building, and technological integration, governments can address the challenges faced by the agricultural sector and promote economic stability and growth. The experiences of the Global Index Insurance Facility (GIIF) underscore the importance of public-private partnerships and innovation in protecting farmers and ensuring food security.

Read the full publication of the African Reinsurance Corporation and articles available in English and French.