NIGERIA INDEX INSURANCE TECHNICAL ASSISTANCE WORKSHOP
GOLDEN TULIP HOTEL, LAGOS, NIGERIA 2nd December, 2019
WELCOME ADDRESS BY MR KEN AGHOGHOVBIA, DMD/COO AFRICAN REINSURANCE CORPORATION
Ladies and Gentlemen,
Since launch of the Nigeria Index Insurance program, African Reinsurance Corporation in collaboration with IFC has initiated various activities in the market to achieve the key objectives of the program.
In order to adequately address the pain points of our stakeholders in the agriculture insurance space, we reached to our clients individually to collate their needs, one of it turned out to be this five day technical workshop that kicks off today.
Ladies and gentlemen, you will all recall the Nigeria agriculture sad story that dates back to the 70’s when ‘The Dutch Disease’ reversed all the gains made then as we all neglected agriculture and opted for the booming oil & gas windfall. However, the recent fall in the world oil prices was again a stark reminder that dependency mainly on oil for Nigeria’s economy is not a sustainable option.
The good news is that Nigeria still has immense economic potential and thanks to the Federal Government Initiatives that triggered the 2012 Agricultural Transformation Agenda and set the ball rolling for the insurance industry to tap into this opportunity, through provision of affordable insurance products to farmers whilst at the same time guaranteeing food security. Since then, Africa Re’s role as the largest reinsurer in Africa has been put to test with the need to provide adequate reinsurance capacity to the Nigerian insurance industry, a feat that has seen the number of approved agriculture underwriters increase to fourteen as of today.
Initially, agriculture insurance products in Nigeria were provided on indemnity basis with the attendant high costs of administration and inherent risks of fraud. Thus Nigerian underwriters over the years have faced challenges in the implementation of indemnity based insurance contracts, a turn off to insurance penetration. In an attempt to address the challenges posed by indemnity products, underwriters sought to introduce index insurance in Nigeria.
The first index insurance program was written in 2017 for NIRSAL rice scheme where four underwriters NAIC, AXA Mansard, Leadway and IGI provided insurance to the scheme supported by lead capacity from Africa Re. A total of 14,589 farmers were covered during the wet season program. Since then approximately 191,626 small scale farmers have been insured on six major index schemes.
Underwriters still face challenges even in the implementation of index insurance contracts for farmers. Key among them include Basis risk outcomes, Absence of reliable historical yield data sets, Non-compliance by farmers to standard farm agronomy practices as well as policy terms and conditions, Affordability of premiums by farmers, Unreliable crop cuts assessments and Inadequate reinsurance capacity.
Ladies and gentlemen, today we are happy to report that the IFC/GIIF fund which Africa Re manages on behalf of the Nigerian agriculture industry stakeholders aligns with our founding mission in addressing the above industry challenges. Africa Re supported by its partners will continue to work with IFC to provide solutions to the Nigerian agriculture industry by assisting in providing adequate reinsurance capacity, training, digital solutions and product development.
The workshop content has been structured based on the market needs and key topics of interest include Price Index, Digital Solutions in the Agriculture Insurance Space and Practical Crop Cuts Methodology which includes a physical farm visit. We hope participants will use this opportunity to engage in more constructive deliberations during the next five days.
I would like to conclude by a big thank you to IFC for its big support to the Nigerian insurance industry.
It is expected that within the next two years, the challenges facing the Nigerian insurance industry in the implementation of agriculture index insurance contracts to farmers will be a thing of the past.