In order to reduce premium for farmers in Africa, the World Bank Group’s Global Index Insurance Facility (GIIF) and African Reinsurance Corporation (Africa Re) have entered into agreement to carry out a risk-sharing facility and encourage companies to create affordable insurance products.
The World Bank GIIF is a multi-donor trust fund that has facilitated approximately 1.5 million contracts that cover over six million individuals, which provides access to finance for smallholder farmers, micro-entrepreneurs, and microfinance institutions through the development and growth of local markets for indexed/catastrophic insurance in developing countries.
The World Bank Vice President for Africa, Makhtar Diop, explained that agriculture provides up to 60 per cent of all jobs on the continent, but African farmers need greater access to insurance mechanisms to develop resilience to external shocks and protect their livelihoods.
According to him, the project is expected to serve as a model to further incentivize other local insurers and regional reinsurers to enter into similar risk-sharing agreements.
He said: “This will ensure the continuation and expansion of index insurance as a risk management tool that will enable smallholder farmers to build resilience against the impact of climate change.”
The Practice Manager, Finance and Markets Global Practice, the World Bank Group, Alejandro Alvarez de la Campa, said the large and complex nature of climate change requires us to work closely with our partners, such as Africa Re, to provide access to finance to those communities that need it the most.
He said: “It is the poor and vulnerable who are the most affected by climate change and natural disasters, and insurance is a critical tool to help protect their livelihoods.
The Managing Director/CEO of Africa Re General Corneille Karekezi, said: “We are excited about the prospect of this innovative solution to give more confidence to African insurers who wish to underwrite the agriculture class of business.”
“It would enhance the development of agriculture and reach out to farmers, who represent over 60 percent of the labor force in sub-Saharan Africa, within the next decade,” he added.