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Agricultural insurance helps enhance food security in Africa

Robust risk management and public-private partnerships are key to resilient commercial agriculture in Africa. Swiss Re shows its commitment to Africa’s farmers by sharing expertise on the ground.

African agriculture is undergoing a transformation. This transformation from subsistence farming to commercial farming offers tremendous potential to improve food security and livelihoods in Africa. At the same time, a new era of opportunity is opening up for both African farmers and international investors, partly driven by the policy environment and market incentives that are getting stronger every day.

For Africa, agricultural growth drives wealth creation, poverty reduction and improved food security, especially for the 70% whose livelihoods depend on the sector. As Africa is endowed with vast, mostly untapped and underutilised land resources, it can also play a key role in meeting the growing world food demand. Yet, with the opening up of new lands and the commercialisation of agricultural production, inherent production risks arise that are mainly associated with the vagaries of nature. A robust risk management and risk-financing framework is needed to overcome the financial impacts of uncertainties such as droughts or floods.

Partnering for food security

"Swiss Re is partnering with local insurance companies, banks and other private sector key players in crafting concrete risk management solutions that will bring peace of mind to farmers in high-growth markets", explains Lovemore Forichi, Senior Agricultural Insurance Specialist for Africa. "Furthermore, we engage in innovative public-private partnerships to foster the rural sectors’ access to the benefits of modern risk management tools. With that, we also help secure significant investments in the agricultural sector that are needed to increase food production."

This crucial need was underlined by His Excellency Jacques Pitteloud (listen to podcast at right), Swiss Ambassador to Kenya, Burundi, Rwanda, the Seychelles, Somalia and Uganda, at Swiss Re's Agricultural Insurance Roundtable in Nairobi, Kenya, in June this year. Speaking to the over 70 delegates who represented insurance companies, banks, government and non-governmental organisations from 14 mainly African countries, the Ambassador emphasised the importance of investing in Africa, specifically in East Africa, to further support the continent’s economic development. Pitteloud went on to say that Swiss Re counts among the first international companies who have successfully established their business in this region over the last few years.

Supporting farmers in Sub-Saharan Africa

For over five years now, Swiss Re has actively supported Sub-Saharan Africa insurance companies and other stakeholders in developing modern financial risk transfer instruments for agriculture. In Kenya, the introduction of multi-peril crop insurance (mpci) by Swiss Re in 2007 has helped protect over 80,000 hectares to date, underwritten and managed by local insurers and free of subsidies. Index-based agricultural insurance products now protect over 13,000 families in Ethiopia and Senegal against adverse weather events such as drought through the R4 Rural Resilience Initiative, a partnership between the UN World Food Programme, Oxfam America, USAID and Swiss Re.

In Ghana, Swiss Re established scalable index-based products in 2010. Plans for traditional mpci products for the country's vast cocoa plantations are in the pipeline. A different approach regarding insurance distribution and product management was chosen in Senegal with the foundation of the agricultural-specific insurance company Compagnie Nationale d'Assurance Agricole du Sénégal (CNAAS) in 2009. As a pool company, CNAAS underwrites the agricultural insurance business. It is owned by the state, local insurers and banks, and gets a 50% premium subsidy from the state.

Unlocking the hidden insurance potential of African agriculture

"Swiss Re has successfully begun to unlock Africa’s agricultural insurance potential, starting with exciting, demand-driven and scalable schemes in countries such as Kenya, Ethiopia, Senegal and Ghana", says Reto J. Schneider, Agricultural Director for Africa, Europe and the Americas. "We are keen on supporting further innovative initiatives in the rest of Africa by offering insurance solutions to mega, meso and micro producers."

Scaling up successful pilots, reducing product complexity and building up capacities and expertise to enhance the understanding of agricultural insurance products will be major goals in the upcoming years. Listening to the farmers to understand their real needs will consequently be crucial to improve the sustainability of the product offering and ultimately enhance food security in Africa.

Published 13 July 2012

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