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Chuks Udo Okonta
To enable insurance firms harness opportunities in the USD256 billion Nigeria projected agriculture production by 2030, Africa Reinsurance Corporation, has sustained its determination to train operators on how to effectively underwrite the business.
The current total value of agriculture production in Nigeria is put at USD104 billion.
The reinsurance giant in its 2022 Agriculture Insurance Workshop, which held recently in Lagos and attracted stakeholders from National Insurance Commission (NAICOM) insurance companies; banks, farmers and other service providers in the agriculture insurance value chain, exposed the underwriters on how they could effectively positioned their operations for the huge insurance opportunities in the agriculture business.
Africa Re., at the event paraded erudite professionals from Nigeria and abroad to speak on topics such as: Agriculture Insurance – Global Perspectives; Digitalising Agriculture Insurance; Data-driven Decision Support & Process for Agriculture Insurance; Crop Cut Experiments; AYII Program – Progress & Challenges and Crop Cut Experiments in Nigeria.
Others are: Alternative Parametric Solutions; Sustainable Agriculture Insurance Practice; Agriculture Insurance Partnership & IFC Initiatives; Agriculture Policy Wording & Conditions and Agriculture Reinsurance.
Deputy Managing Director/COO, Africa Reinsurance Corporation, Ken Aghoghovbia, in his opening remarks at the event, said
owing to the richness of farming in Nigeria, it is projected that the market has a potential to generate at least USD 600 million worth of agriculture insurance premium in a year, against the USD 10 million reported during the year 2021.
This according to the him, leaves a gap of $590 million untapped insurance potentials in the country yearly.
He submitted that these bright economic prospects, provide huge opportunities for insurance companies to innovate and provide risk transfer solutions to cover the inherent risks associated with farming activities.
Aghoghovbia noted that agriculture remains a key contributor to Nigeria’s Gross Domestic Product (GDP) and like in many emerging economies, accounts for 30 per cent of the country’s total economic output; providing employment to at least 35 per cent of its over 200 million population.
He submitted that with sustained pressure on food security, arising from the increasing population and the government’s push to diversify the economy, agriculture will continue to be a key area of focus in many years to come, adding that sadly, this undertaking is undermined by the limited investments in the sector, and the uncertainties resulting from the effects of climate change.
Aghoghovbia maintained that since 2017, the agriculture class of business has generated a lot of interest from several market players and currently, at least 16 insurance companies have received NAICOM’s approval to underwrite the business, thus complementing the efforts of the Nigeria Agriculture Insurance Company (NAIC).
He stated that the prominence of small holder farmers in Nigeria’s food production systems dictates that partners explore new approaches to providing effective and affordable insurance products.
“In line with our mission to support the development of African economies including that of our beloved country Nigeria, Africa Re recognizes the significance of the agriculture sector in fulfilling the aspirations of many farming households.
“Therefore, our team endeavors to work with like minded partners, like yourselves, to make the agriculture class of insurance business a significant contributor to the ambition of increasing insurance penetration in Nigeria and indeed the entire region,” he stated.
He posited that at Africa Re, they are deliberate about leveraging their wide range of expertise and knowledge, backed by solid financial strength, to provide the much needed reinsurance capacity in the agriculture sector, stating that over the last five years, the market has seen exponential growth in insurance premiums from agriculture, but this growth has been overshadowed by the unfavorable loss experience.
“This poor performance reveals the need for the market to invest more in stakeholder engagement including training, aimed at improving underwriting skills as well as claims handling capabilities,” he said.
The Africa Re. DMD, noted that whereas a lot of work has already been done in addressing some of these challenges, Africa Re recognizes the need for continuous improvement especially during this ever-changing business environment and hopes that the workshop will help to move all stakeholders towards the desired.
He said agriculture insurance is still in its formative years in the country, hence the workshop which is aimed at providing a platform for candid conversations with a view to developing homegrown solutions to move the agriculture insurance in Nigeria to the next level.
Other resource persons that spoke at the event, identified risks in agriculture insurance to include; market/economy, which are associated with market demand and supply forces, determining how much farmers would eventually sell their products.
Others risks are: social, resulting from civil disturbance, malicious damage and change in social environment.
Production: which arises from natural risks; weather conditions; pest and diseases.
Financial: Access to credit and capital for production.
Institutional: Policies of the government and it’s agencies.
Human: Availability, access and cost of quality human capital.
On what makes an agricultural risk insurable, the team identified probability of a loss in the future as the main determinant of insurability , adding that this is possible only if reliable loss data is available for a sufficiently long periods in the past.
Africa Re’s agriculture team also submitted that the loss must be capable of being estimated in financial terms and that probability of occurrence should not be too high, so as not to make insurance
Unaffordable. Furthermore, occurrence of an event, or the damage it causes, should not be affected by the insured’s behaviour(Moral Hazard) and to the extent possible, the risk should be an independent and fortuitous
The experts on agriculture insurance value proposition, submitted there is a need have risk transfer mechanisms in place to cushion farmers against inherent risks in farming as elevated by effects of climate change.
Access to finance: it was highlighted that bundling credit with insurance has the potential to minimizes default risk thus limiting exposure of financial institutions willing to provide finance to agriculture sector.
Finance service deepening: Increasing access to data and financial services available to farmers has potential to stimulate increased investment in agriculture and hence guarantee improved productivity.
