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Understanding the role of insurance in agritech investments

Although agriculture contributes 40% to Nigeria’s Gross Domestic Product (GDP) and puts about 70% of the population to work, Agri-business or farming is yet to gain popularity among Millennials.

But that is gradually changing with the influx of tech-backed agriculture investment platforms in the country. The Millennials who make up about 65% of Nigeria’s populations have a strong affinity for technology innovations and social media. The combinations of technology and attractive returns on investment means that young people could become farmers without being physically involved.

According to Techcabal, an online and digital media platform dedicated to coverage of Nigeria’s tech ecosystem, there are “over sixty Agritech firms in Nigeria promising anywhere from 15-40% returns”.

The GSM Association’s 2020 Report on ‘Agritech in Nigeria; Investment opportunities and challenges’, revealed that about $63 million was invested in Agritech companies across Sub-Saharan Africa in 2019, with Kenya, Nigeria and Ghana emerging the most vibrant in the ecosystem.

Read also: Sovereign Trust Insurance grows PBT by 51.5% in 2019

Yet, there are concerns about the proliferation of these platforms and their mouth-watering Return-on Investment offerings. The Nigerian Securities and Exchange Commission (SEC) also warned that with Agritech investment market largely under-regulated, interested investors must endeavour to carry out due diligence before committing to an investment. This is where insurance, comes in, albeit with a caveat on how it protects the Agritech promoters and the investors:

Leadway Assurance Company Limited, which currently provides Agric cover to over 30 digitalised agricultural platforms, is energising hope in the industry but wants investors to understand how this applies to them.

Are individual investor’s funds and proposed returns covered in the Agric Insurance?
This position implies that Leadway Assurance only provides cover (over a particular period) for specified farming risks, e.g. Poultry risks, against insured perils (e.g. death of birds due to Fire, Flood, Diseases) as stated in the Insurance policy document issued to a farm and not on individual investor’s funds and the returns. The insurance contract is effected in the name of the Agritech tech platform and not in the name of the individual investor. Therefore, it is the Agritech platform that has a right to compensation/claims from the insurance contract when a loss occurs.

Does it mean that an investor will lose everything if the crop is lost, funds and returns?
If the Agritech platform sincerely invests the investors’ fund in an Agric project and insures same with Leadway, and the insured farm suffers a loss as a result of the perils stated in the insurance contract, Leadway will pay the benefits to the Agritech platform. It is expected that the Agritech platform will, in turn, pay the investors from the compensation paid to them by Leadway. If this is done, the investor’s capital, to an extent, is protected. It is important to reiterate that insurer contractual obligation is to the Agritech platform and not to the individual investors.

Does it mean the insurance policy does not cover the investors’ capital as stated on Agri-tech Company’s website?
Leadway Assurance only provides cover for risks to the insured farm (e.g. ginger crop) against perils stated in the insurance policy document issued to the Agric-tech Company and not on individual investor’s funds and the proposed returns. Therefore, an investor cannot claim under this policy. In the event of a loss of the Agric project, Leadway’s Assurance liability is limited to the amount invested in an Agric project by the Agritech platform and insured with Leadway after crowdfunding from the investing public. For example, if the sum of N100, 000,000 was crowdfunded from the investing public and the Agritech platform invests only N50, 000,000 of this amount in an Agric project, it is the latter sum that will be covered in the insurance contract with Leadway. In other words, the liability in the event of a loss will be limited to the N50, 000,000 and not to the N100, 000,000 from the investing public.

For more information, please call our expert advisors on Agribusiness insurance today, via our virtual communication channels – 08129997115, Social Media handles @LeadwayAssurance on Facebook & Instagram and @Leadwayinsure on Twitter or send an email to

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