African farmers get more protection from extreme weather

African farmers get more protection from extreme weather

#climate and sustainability
A new insurance initiative aimed at safeguarding African farmers from climate-related shocks has been unveiled by the African Development Bank.

Africa's emerging insurance sector is taking proactive steps to shield farmers from the impacts of climate change, courtesy of the African Development Bank (AfDB).

"Extreme weather patterns negatively impact the livelihoods of many millions of farmers in Africa, the majority of those being women. One way we can tackle this issue is to be sure that farmers have access to crop and livestock insurance,” the bank's president, Akinwumi Adesina explained in a statement.

The initiative, known as the Africa Climate Risk Insurance Facility for Adaptation (ACRIFA), plans to raise an initial US $1 billion of concessionary high-risk capital and grants. 

The AfDB's move aligns with a broader commitment across the continent to advocate for and provide insurance solutions, particularly in critical sectors like agriculture and thereby cushion households from extreme weather patterns.

From government-led programs to initiatives led by multilateral organizations, insurance is proving to be an effective tool in shielding farmers from climate shocks. 

This comes at a time when the insurance market in Africa is experiencing notable growth, reversing previous trends of stagnation.

IMARC Group data indicates that the Africa insurance market reached US $81 billion in 2022, from US$65 billion in 2017. Projections suggest it will reach US$123  billion by 2028.

Insurance penetration in Africa, as a percentage of GDP, is currently only half of the global average, offering substantial potential for growth.

Competition among market players and the difficulties of a fragmented market (with 54 countries offering 54 different legislative frameworks) has sparked innovation and disruption in Africa's insurance sector with insurers leveraging technology to target specific segments and reduce costs. The burgeoning insurtech sector, a significant driver of insurance uptake globally, is also contributing to growth in Africa.

"As private sector insurers, we have a key role to play in ensuring a sustainable future," said Phillip Lopokoiyit, group CEO of ICEA LION Group, underscoring the sector's role in bolstering resilience in sectors like agriculture. 

In Djibouti, Ethiopia, Somalia, and Kenya, a World Bank-sponsored insurance project is targeting 1.6 million herders while in Tanzania, the Agriculture Insurance Consortium in collaboration with the Association of Tanzania Insurers is working to provide comprehensive insurance coverage for agricultural activities in the country.

This is in addition to an earlier initiative targeting crop insurance coverage for growers, a venture that brought together Yara Tanzania - a fertilizer manufacturing firm, Jubilee Insurance and Equity Bank Tanzania.

Regional initiatives like the African Risk Capacity, an agency of the African Union, are providing institutional support in the event of extreme weather.

The agency in July launched the first Flood Risk Insurance Product in Africa, a new insurance mechanism for African countries to cope with the devastating effects of flooding.

Partnering with JBA Risk Management, ARC, the flood insurance model is available to high flood-risk countries such as Madagascar, Mozambique, Malawi, Cote d’Ivoire, Ghana, and Togo, and will be extended to other countries in 2024. 

The Nairobi Declaration on Sustainable Insurance – a 2022 commitment by African insurance industry leaders to support UN Sustainable Development Goals – indicates that the insurance industry in Africa aims to underwrite US $14 billion in cover for climate risks, by 2030.

bird story agency


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