Global Index Insurance Conference: Building Innovative Solutions in Agriculture Insurance

14-16 September 2015, OECD Headoffice, Paris.

The World Bank Group with its event partners AXA Corporate Solutions, Swiss Re, Crédit Agricole Assurances and Airbus called for a renewed dialogue in building stronger partnerships with the private sector to promote innovations in the insurance sector, especially in agriculture insurance.

Ms Gaby Ramm (Member of the MCII Advisory Group to the Climate Risk Adaptation and Insurance in the Caribbean project) highlighted the importance of products for farmers AND portfolio insurance for financial institutions or other aggregators, during the discussion on individual vs portfolio products. This is an approach followed by MCII in the Caribbean to cater to the specific demands of the different target groups.

To further emphasise on MCII's main strategy, she stressed that insurance needs to be embedded into broader DRR mechanisms, incl. social protection programs (e.g. the R4 in Africa), and integrated into the National Adaptation Plans - which highlights the importance of PPPs.

Context of the Conference:

The Bank’s 20013 report on Building Resilience: Integrated Climate and Disaster Risk into Development noted that weather-related losses and damage have risen from an annual average of about $ 50 billion in the 1980s to almost $ 200 billion. 

This critical situation calls for joint action to address the adverse impacts of climate change and to enhance disaster-resilience through index agriculture insurance: Farmers, credit providers and agri businesses could become risk averse when making investments and lending decisions in the absence of appropriate risk management tools. 

As many countries lack insurance to mitigate the impact of climate change, the conference discussed challenges and positive examples when building sustainable and scalable insurance markets focusing on index insurance at all three levels (macro, meso/sectoral, and micro level).
Among other issues the multi-stakeholder participants presented and explored

  • Favorable conditions for achieving scale, building markets and institutionalize index insurance;
  • Financial solutions in agricultural risk management and experience with disaster funds (e.g. ARC);
  • Enhancing agricultural insurance product quality and addressing data challenges;
  • The role of governments, the private sector, and international organizations in building markets for index insurance;
  • Distribution channels for index insurance.

Basis risk remains as a key constraint of index products but over the years, enhanced options for better data quality and calibration of various data sources are available leading to better modelling of the products.

For enhancing the acceptance of micro-level index products, several linkages to other services were discussed such as easier access to credit and appropriate seeds, discounted fertilizers and pesticides, provision of agricultural training incl. information on prices, weather forecast, etc.

One of the strong recommendations was that despite improved products and services, consideration should be given to combining weather and yield index or index and non-index insurance.