Insurance

Royal Exchange General Insurance Company Agric Insurance Initiative 2020 & beyond

Agili

A lot of firsts were recorded by Royal Exchange General Insurance Company (REGIC) in the year 2019.

Starting off with the spill over of investment talks with the InsuResilience Investment Fund (IIF) of the German Development Bank (KfW) in 2018 which culminated in thefull and final closure of an equity investment deal of 10 million dollars with them in REGIC as at October 2019; we were able to, in one fell swoop, register our presence as a keyglobal financial investment destination in Africa and an insurance player of reckon in the emerging climate change insurance market for agriculture in Nigeria.

As you might be well aware, climate change or weather risks eg, flood, droughts, etc remain one of the dominant perils plaguing small-holder farmers today in the country and appreciating the fact that 85% of our farming population comprises of these vulnerable small holder farmer groups, it therefore became imperative for us at Royal Exchange to use insurance to play a central role in promoting business and community resilience to the agricultural sector and rural finance ecosystem to avert the scourge of food shortages, food security issues, unemployment and host of other associated perils that can affect the wider economy from the impact of not insuring agricultural production against climate change perils over the long term.

Coincidentally, it was our early foray into the agricultural insurance space and impressive works done on the development, distribution and sales ofclimate risk protection products for small-holder farmers under the auspices of our index-based agricultural insurancesolutions that attracted interests from the Kfw and translated in their investment in our company.

The IIF investment, being of social impact nature, comes with the trappings of technical assistance facilities to aid thecompany in scaling up her agribusiness risk portfolio alongside driving a social impact mandate of providing insurance inclusion to a minimum of 1 million small-holder farmers by the year 2025. Our key social performance parameters includes adoption and coverage of index insurance amongst identified farming population practising rain-fed agriculture in Nigeria as their primary means of livelihood against the perils of climate change and by extensionprovision of protection of their household.

In-house, we are channelling the facility towards growing expertise and core competences in climate-change insurance products design, marketing and distribution, education and awareness generation, training and capacity building, as well as sales support in delivering on our expected financial and social objectives. As mentioned earlier, the TA support makes provision for trainings of external stakeholders as well and we intend using these tools to champion education and advocacyon effective uses and benefits of Index-Based Agricultural Insurance solutions for tackling climate change in the agricultural upstream (i.e. crop or livestock farming)especially in areas of de-risking agribusinesses and unlocking flows of finance and investments to same industry.

Leveraging on the relationship established with the IIF, we opened our doors for business in 2019 with lofty expectations;courting a host of recognized farmer cooperatives, agro-centric financial institutions and agribusiness aggregators working with small-holder farmers with a sales objective ofoffering our agricultural insurance cover to protect their rain-fed agricultural production risks. We were soon to discoverthat the warm reception received from potential clients came with a great degree of scepticism as many still struggled with the tilt towards patronizing private insurers to underwrite their agribusinesses. We also realized an apparent disconnect between their level of awareness and understanding of efforts being made by government and our apex regulator – NAICOM – in licensing private insurers to underwrite agricultural risks and equally approving use of index insurance products for agriculture in Nigeria. Their reaction nonetheless is regarded as quite normal taking into consideration that only just recently the entire agricultural insurance market space was solely underwritten by the Nigerian Agricultural Insurance Corporation. However, I dare say the landscape is evolving!

A good level of market sensitization is continually been doneby NAICOM in A good level of market sensitization is continually been doneby NAICOM in collaboration with the Nigerian Incentive Based Risk Sharing System for Agricultural Lending (NIRSAL) and the Federal government under her various intervention schemes such as the Anchor Borrowers’ Programme in spreading the message to the the market abouta level playing field being created to allow for private insurance participation in the underwriting of agriculture as a measure to not only drive healthy competition in the marketbut also create an environment that nurture productinnovations to match growing demands for insurance inclusion to a largely underserved and unserved farmer population. We also witnessed several policy pronouncements in the course of the year in the areas of the land border closureby the Federal Government and the directives issued by theCentral Bank of Nigeria instructing deposit money banks to comply with a Loan-Deposit ratio of 65%; invariably pushing lenders to borrow to players in the real sectors of the economyof which the Agriculture is one of them.

These moves inextricably catalyses a policy convergence roadmap by the government aimed at ramping up food productivity in the country locally and concurrently driving significant volumes of agricultural lending through the banks to an estimated 30 million local farmers to expand their current production capacity to meet demands. For us, agricultural insurance plays a critical role in the de-risking of agricultural lending in thevalue-chain and serves as the foundation upon which financeand investments can be funnelled into to the sector with the right kinds of institutional collaborations to drive financial inclusion within our agrarian economy. It is in this light thatRoyal Exchange is pursuing collaborations with government and other stakeholders to unlock the opportunities that abound in promoting agribusiness value-chain financial services to aid the nation’s quest in achieving food sustainability, securityand improved output.

Luckily for us, our efforts have started paying off as REGIC was able to launch two variants of her agricultural index insurance products in 2019 under her “SMART AGRIC” stable; namely the Hybrid Index Insurance (HII) for small-holder farmers and our enhanced Multi-Peril Crop Insurance cover (MPCI) embedded with Weather Index Insurance (WII)) for medium scale producers and crowd-funding agribusinesses.
Crucial to achieving these milestones were our strategic business partnerships with NIRSAL, AFEX commodity exchange, Bijan Farms, Green Eagles Agribusiness Solutions to mention a few. Having worked over a span of two years with NIRSAL developing and perfecting the initial designsand features of our first index product variant – the Hybrid Index insurance (HII) – we were able to launch same productin the 2019 wet-planting season; making Royal Exchange the first-ever insurer to launch this climate change protection package for the Nigerian market.

For us, our HII product stands out as an agricultural insurance protection product offered to small holder farmers and aggregators alike to protect their rain-fed agriculture from perils of climate change such as dry spells, drought, excess rainfall and flood etc, leading to crop shortfall or losses. It is as an advanced variant of Weather Index Insurance bundledwith a vegetative index cover, better known as Normalised Difference Vegetation Index (NDVI). The name “Hybrid”Index was actually coined to emphasis the dual-trigger nature of the product which combines crop protection risks against climate change to growers of maize, sorghum, soybean and tomato crops etc in addition to a cover for an imminent loss of vegetation resulting from pest and diseases attack, environmental factors et al. This combined protection ensures that small-holder farmers are adequately insured from all sorts of farming risks to be encountered throughout the farming or planting cycle.

We believe our HII package serves as a risk transfer tool for farmers to use in redirecting their climate change andvegetation risks away to REGIC to manage on their behalfbeing a professional risk manager. The whole essence is to de-risking the face of farming business as we know it today to make farming a more business-friendly endeavour. That said, other achievements worthy of mention is our additional layering of life insurance cover with the HII product bundlethus providing a much more comprehensive index insurance solution to our clientele.

We had instances where we successfully embedded credit life and life improvement/funeral insurance cover to our HII product. This was done to provide new layers of protection to the farmer and his or her household apart from directly addressing issues of crop losses being faced by the farmer as a result of climate change. We went a step further layering a protection cover for the farmer’s household against circumstances leading to a possible default on credits offered to farmers by a financial institution arising from death orpermanent disability and also provision of a stipend to families or beneficiaries to the farmer in instances in scenarios where the deceased farmer family or beneficiaries are left cash-strapped to support themselves upon the sudden death of a farmer. This cover being live expectancy/funeral cover is packaged to assist the household under economic and financial strain stemming from the loss of a breadwinner – the farmer.

Moving on to our second product, the enhanced MPCI, it comes as a traditional indemnity-based agricultural insurance protection product with an embedded weather index-based insurance cover as for weather related risks. This product was designed to address the needs and preferences of medium scale growers and crowd-funding outfits as a business proposition to manage their insurance costs better and agribusiness risk portfolio more intelligently. We piloted the above mentioned products with the collaboration and assistance of Green Eagles Agribusiness Solution Limited that happens to be run a crowd funding agribusiness model platform for financing production activities in their farms. Our MPCI with WII product was used by Green Eagles for their tomato project in 2019 and we look forward to using same for their rice farming project in 2020. Once again, it is on record that we are the first insurance company in Nigeria providing such services to agribusiness clients in the Nigerian market.

Key to the success on our delivery of these new products to industry also hinged on our investment in an agribusiness insurance enterprise solution to aid our ability to perform a multiplicity of tasks ranging from farm surveillance remote- sensing, risk profiling and index insurance underwriting up tosatellite monitoring and evaluation of agricultural risks as it pertains to our clients’ farm portfolio. As of today, our agribusiness solution enables us to perform the followingfunctions and responsibilities:
1) Digital registration of smallholder farmers, farmer cooperatives and aggregators
2) Geo-mapping of farmers to their farmlands to aid remote monitoring via satellite
3) Risk profiling of farmers, assignment of premium pricing automatically and in line with their assessed risk
4) Automated issuance of index and indemnity- based insurance policy documents to clients
5) Farmland surveillance, climate-change risk monitoring and evaluation via digital remote sensing tools to assess claims pay-outs to farmers.
6) Automated claims computation and payment.
The platform also has incorporated an electronic walletsystem to ensure prompt payment of claims directly to farmers at their remote locations upon the crystallization of insured perils. At the end, we pride ourselves once again on our foresight to having invested early in the state-of-the-art end-to-end agribusiness insurance solution for the Nigerian agricultural market with capabilities to handle a whole host complex underwriting of climate change risks.

That said, having gone through the past year and entertaining a great of learnings, we are evermore committed and determined to deepening our foothold in the agribusiness space in 2020 as we target underwriting a minimum of 40,000 farmers within the current calendar year. A lot of energies would be devoted in bundling, distributing and selling of our packaged hybrid index insurance products in the market. Important to us would be our ability to possible layer an additional micro-health insurance cover for farmers as part of unique selling proposition this year and in collaboration with our sister HMO company – Royal Exchange Healthcare Insurance . We are excited at the opportunities this partnership would bring to the table.

There would also be marketing communication agenda andseveral trainings on use of index based insurance to tackle climate change to bridge the knowledge gap andunderstanding amongst smallholder farmers, farmer cooperatives, aggregators and other key players. Actors would equally be trained on the adoption and use of our agritechtools as a business enabler to their businesses in managingtheir farm portfolio remotely and improving data collation for underwriting of their risks and remote monitoring of their portfolio.

In addition, we intend beyond our offerings of our index based crop insurance solutions to farmers to introduction ofnew index-based and indemnity livestock insurance productsfor both smallholder pastoralists and commercial livestock breeders. This move is poised to broaden opportunities for us in the livestock market as well.
Lastly, it’s going to be a very busy year for us on all fronts. Asides, agriculture, we would be pushing our mobile insurance initiative and footprint to address issues of access to retail insurance services by the public. More on this and other initiatives on the general insurance business space would be unveiled possibly during our next interactions.

For now, I thank you for your time and audience, and bid youfarewell.

Benjamin Agili
Managing Director
REGIC

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