Will agriculture insurance usher in food security?

Agriculture insurance is quickly gaining ground as a way of fighting the cycle of poverty, made worse by natural disasters such as floods and drought which destroy food and kill animals.

In Kenya, recurring drought has meant severe food shortage resulting in deaths of people and animals, slower economic growth, and the shame of begging for food aid.

But agriculture insurance is becoming a popular solution to mitigating against the cycle of poverty created by harvest loss.

Farm input insurance means the farmer will get cash equivalent to the expected harvest.

It also means that affected farmers get inputs without spending new money.

In a country like Kenya where agriculture is a critical economic driver, contributing a quarter of our national wealth, insurance is a priceless service.

However, not many people are able to access the service because of a myriad factors including lack of awareness and shortage of tailor-made products in the market.

To get more insight into how farmers can increase access to agriculture insurance, Business Daily spoke to LOVEMORE FORICHI, an agricultural insurance specialist at Swiss Re.

What delivery models will help increase the use of agriculture insurance in Africa?

The bulk of the business now comes through the broker to insurance company to reinsurer.

We see the need for other stakeholders within the agriculture value chain to be involved, such as investors, micro-financers, input providers, commodity associations and traders.

Investors and input suppliers, for example, can require farmers to assign them the proceeds of insurance as collateral for loans and pre-financing of inputs respectively.

Similarly, commodity traders — who have entered into forward contracts — can require farmers to cover their losses in case of default due to a shortfall in crop production.

Farmers can do so by pledging their insurance title.

By encouraging farmers to hedge their risk with professional risk carriers, such as insurance and reinsurance companies, the impact of volatility can be softened.