Thursday, February 23, 2017
The World Bank Group’s Global Index Insurance Facility (GIIF) and African Reinsurance Corporation (Africa Re) have entered into an agreement to carry out a risk-sharing facility, in form of an experience account, to decrease premium levels for insured farmers and encourage local companies to create affordable insurance products.
The project is expected to serve as a model to further incentivise other local insurers and regional reinsurers to enter into similar risk-sharing agreements. 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.
Under the project, the facility will reimburse the insurers who experience more than a 75 percent annual loss ratio, thereby decreasing the cost borne by primary insurers. As a result, insured farmers will benefit from lower premium prices and receive payouts faster because of a pre-agreed pricing rule which allows local insurance companies to process claims faster.
“Agriculture provides up to 60 percent 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,” said Makhtar Diop, World Bank Vice President for Africa.
Read full press release here.