To increase insurance penetration in African markets, especially in the area of the underwriting of new insurance climate policies, the International Finance Corporation (IFC) has concluded an arrangement to inject $1.9 million into the market.
The IFC’s $1.94 million was part of the resolutions of the 48th African Insurance Organisation (AIO) Conference and Annual General Assembly held in Nairobi, Kenya, to provide advisory services for the development of new climate insurance products and risk analytics, helping insurers in Nigeria and Zambia to underwrite smallholder farmers profitably.
The project targets 2.4 million new climate change policies from the two countries in the next three years.
According to the IFC, the objective of the project is to improve the resilience of smallholder farmers by increasing their access to climate and other inclusive insurance products.
Zambia and Nigeria will each be funded to the tune of $970,000 in a programme which IFC said will also contribute towards increasing access to insurance by women farmers while the advisory programme will help in scaling up the existing climate change insurance products and strengthen the insurers’ business development and underwriting capacity.
IFC explained that the inclusive climate insurance programme will help to enhance insurance regulators’ supervisory capacity. Many underwriters in Africa, including those in the east and west Africa, are signing up for a sustainable insurance agenda. But high loss ratios in the emerging insurance classes, such as animal and crop insurance, have seen a good number of players steer off such areas.
The IFC programme hopes to turn this around by helping insurers to establish “more diverse, efficient and sustainable insurance product distribution channels and insurance processes,”
By the end of the programme in June 2025, Zambia underwriters are expected to have issued at least 1.5 million new inclusive climate insurance policies to smallholder farmers, generating a premium value of at least $4 million.
In Nigeria, IFC aims to help the insurers issue at least 900,000 new such policies, generating a total premium volume of at least $3 million.
In addition, underwriters in these two markets are expected to have launched at least two new financial or insurance products and established at least one new partnership with a bank, agribusiness or any other entity.
Such partnerships between insurers and banks or agribusinesses, IFC says, will help underwriters in the “bundling of insurance solutions with credit and other products.”
Regional reinsurer Zep-Re has success stories from countries such as Zambia through the Farmer Input Support Programme.
Zep-Re Chief Executive Officer, Hope Murera, who led the reinsurer in acquiring a stake in Agricultural and Climate Risk Enterprise (Acre) Africa, said their experience in Zambia confirmed that bundling agricultural insurance with other products can help accelerate the uptake of crop and livestock cover.
“We have seen that when we do bundling (of agricultural insurance) with seeds and fertiliser, with government support, then we can cover more.
“We have had success stories in places like Zambia,” says Ms Murera.
At the heart of the IFC programmes in Zambia and Nigeria will be such partnerships and the sharing of lessons learnt from other parts of the world.
