Smallholder farmers see better insurance protection on Africa Re, IFC’s intervention

An intervention by Africa Reinsurance Corporation (Africa Re) and IFC, a member of the World Bank Group, to support African insurers in providing risk solutions to smallholder farmers is beginning to yield results in Nigeria.

While it has increased the number of insurance companies participating in Agric risks in Nigeria from 4 in 2017 to 15 in 2021, confidence is coming to smallholders farmers who are already enjoying access and claims settlement on their losses.

Africa Re and IFC’s intervention came following inherent challenges faced by local insurers across Africa including lack of capacity, volatility of agric risks, among others, which did not allow them to expand penetration in that space.

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In order to address these challenges, the IFC’s Global Index Insurance Facility (GIIF) therefore set up an experience account whereby the loss ratios of the net account for local risk carriers would be capped at 75 percent and the excess loss amounts transferred to the Global Index Insurance experience account, with Africa Re as the fund administrator.

The Global Index Insurance Facility (GIIF) is a multi-donor program managed by the World Bank Group created to address the scarcity of affordable insurance protection against weather and catastrophic risks in emerging countries.

GIIF is supported by the European Commission, the African, Caribbean, and Pacific (ACP) Group of States, the Netherlands Ministry of Foreign Affairs, the German Federal Ministry of Economic Cooperation and Development (BMZ), and the Japan Ministry of Finance

The pilot phase of the experience account was set up in 2017 for a 3-year period to end in December 2020, with a $900,000 fund covering Nigeria and Zambia, and was intended to support the development of weather and area yield index insurance programs in these countries.

During the last 3 years, the experience account fund has been triggered twice with two risk carriers, Mayfair Insurance Company (Zambia) and AXA Mansard Plc (Nigeria) benefiting in 2019 from the fund following various floods losses that impacted their net account portfolios.

In 2020, the Nigeria market was again hit by flood losses that affected eight local risk carriers on the CBN Area Yield Index Anchor Borrowers Program (Wet Season) for rice, maize, and cotton crops.

Ibrahim Kabiru, national president of, All Farmers Association of Nigeria (AFAN) said, “every smallholder farmer under the Central Bank of Nigeria (CBN) Anchor Borrowers Program is insured by the Nigerian Agricultural Insurance Corporation (NAIC).”

“Rice farmers who were affected by the 2019/2020 flooding were compensated and this made a lot of them return to farming the next season,” Kabiru said.

The total market gross claim in 2020 was N1.996 billion and the local insurers that covered the risk included Veritas Capital, Leadway Assurance, AIICO Insurance, AXA Mansard Insurance Plc, and Royal Exchange Insurance Plc.

Africa Re on the other hand paid about $1.5 million to the lead insurer as their reinsurance share of the claim and has handed out a total of $827,000 to the local risk carriers from the IFC’s GIIF experience account fund.

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, Ken Aghoghovbia, DMD/COO, Africa Reinsurance Corporation said.

Aghoghovbia said the IFC/GIIF fund, which Africa Re manages on behalf of the agriculture industry stakeholders, aligns well with its mission statement of fostering the development of the insurance and reinsurance industry in Africa.

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