Under the agreement, Africa RE and IFC’s Global Index Insurance Facility will help Nigerian insurance companies licensed by Nigeria’s insurance regulator, NAICOM, develop agricultural insurance products, and deepen their index insurance business lines. These index insurance products will help protect farmers against environmental risks such as drought, floods, erratic rainfall, and other natural hazards.
Index-based agricultural insurance, which pays out based on transparent parameters like rainfall and does not require costly field visits to verify losses, is an innovative and efficient way for farmers to protect themselves against losses.
Eme Essien, IFC Country Manager for Nigeria, said, “IFC’s support for affordable and accessible agricultural insurance will help Nigeria’s farmers mitigate the effects of climate-related shocks, protecting them against catastrophic losses and unlocking access to finance. Developing a sustainable agricultural insurance industry also requires a strong commitment from regulators, such as NAICOM, who embrace innovation to help farmers manage their risks.”
Ken Aghoghovbia, Africa RE’s Deputy Managing Director/Chief Operating Officer, said, “We are excited to be partnering with IFC in assisting Nigerian insurers to develop appropriate insurance products for smallholder farmers. This initiative will certainly help move Nigeria towards its goal of food security and it is in line with Africa RE’s mission to support African economic development.”
Benefits of the agreement to farmers in Nigeria
According to a statement by IFC, the agreement will help thousands of smallholder Nigerian farmers to easily access insurance to protect their crops and livelihoods.
Farmers with crop insurance are also more likely to access other financial products, including credit, and to invest in higher quality production inputs. However, the traditional insurance market has largely failed to meet smallholder Nigerian farmers’ demand for affordable insurance with its high premiums and transaction costs.
IFC’s and Africa RE’s specific support to insurance companies will include helping them design specialised insurance products and develop digital platforms so farmers can easily view and compare index insurance offerings from various providers. IFC and Africa RE aim to provide thousands of farmers with access to insurance by the end of 2020.