Capacity Development Agricultural Risk management seminar 27-28 June 2018 | Lusaka, Zambia
Mayfair Insurance: Agricultural Risk Mitigation Solutions A Public-Private Partnership built on The Finance, Information & Risk Management (FIRM) Model Feasibility Study on Improving Delivery of Risk Management Services to Farmers
About Mayfair Insurance Mayfair Insurance is a general insurance company that began accepting business in June 2010 Company which began accepting business in July 2010 having been duly registered and licensed by the Pensions and Insurance Authority. The company is a subsidiary of Mayfair Insurance Company Limited of Kenya which has continued to run a successful business in the highly competitive Kenyan market. Mayfair Insurance Company Zambia Limited will continue to strengthen itself as a leading general insurance provider and will ensure its own growth in the Zambian economy .
What is Agricultural Risk • Risks faced by farmers are numerous and varied, and are specific to the country, climate, and local agricultural production systems.
Risk transfer mechanisms • Mitigation: is the lessening or limitation of the adverse impacts of hazards and related disasters. Risk mitigation options are numerous and varied (for example, crop and livestock diversification, income diversification, soil drainage, mulching, use of resistant seeds, avoidance of risky practices, and crop calendars). • Transfer: refers to the transfer of the potential financial consequences of particular risks from one party to another. While insurance is the best-known form of risk transfer, in developing countries the use of informal risk transfer within families and communities is extremely important. • Coping: refers to improving the resilience to withstand and manage events, through ex-ante preparation and making use of informal and formal mechanisms in order to sustain production and livelihoods following an event. Although we have noted that coping is an ex-post activity, it is possible to plan and to prepare for coping activities on an ex-ante basis. This is often fiscally beneficial, as the ability to quickly respond to events often reduces losses .
Risk transfer mechanisms
Agricultural Risk Management IN INSURANCE: Commercial and Micro- Insurance Solutions
MULTI- PERIL CROP INSURANCE (MPCI) WHAT IS MPCI • COVERS LOSSES AS AND WHEN THEY OCCUR IN THE FIELD • REQUIRED PHYSICAL VERIFICATION BY THE UNDERWRITER/ INSURER • SUITED FOR LARGE SCALE FARMERS • SUITED TO FARMERS FARMING A PARTICULAR CROP ON OVER 5 HECTRES OF LAND • PERILS COVERED • MALICIOUS DAMAGE • FIRE • WINDSTORM, FLOOD, HAILSTORM • CROPS COVERED • MAIZE, COTTON, WHEAT, BARLEY, SOYA BEANS
COVER OPTIONS AVAILABLE THERE ARE BASICALLY 2 • COST OF INPUTS/ PRODUCTION • SUM UP THE COSTS OF INPUT THAT WILL BE THE SUM INSURED • VALUE OF EXPECTED OR REVENUE • THIS WILL BE BASED ON THE HECTARAGE MULTIPLIED BY YIELD PER HECTARE THEN MULTIPLIED BY THE EXPECTED SELLING PRICE • YIELD IS; HISTORICAL YIELD OVER THE PAST 3/5 YEARS OF THE CROP TO BE INSURED
TOBACCO HAIL AND WIND FOR COMMERCIAL FARMERS • COVER IS BASICALLY HAIL AND WILD ON THE TOBACCO LEAF AND • FIELD TO FLOOR ON THE TOBACCO LEAF SUM INSURED IS BASED ON THE VALUE OF THE LEAF
LIVESTOCK • COVER UNDER THIS TYPE OF INSURANCE IS, MORTALITY COVER. • DEATH OF INSURED LIVESTOCK DUE TO ACCIDENTAL DEATH • EMERGENCY SLAUGHTER AS A RESULT OF ACCIDENTS, ILLNESS, DISEASE, EPIDEMICS AND CAN BE EXTENDED TO INCLUDE, THEFT OF THE ANIMAL(S), CALVING RISKS ANIMALS COVERED • CATTLE • SHEEP • GOATS • PIGS • POULTRY
INSURED VALUE: LIVESTOCK • THE SUM TO INSURED IS THE MARKET VALUE OF THE ANIMAL(S) • VET CERTIFICATION IS A PRE-REQUISITE; THIS IS BECAUSE WE NEED TO ASCERTAIN THE HEALTH STATUS OF THE ANIMAL(S)
MAYFAIR ONESTOP POLICY • WE ALSO COVER FARM ASSETS: • MOTOR VEHICLES • PIVOTS • EQUIPMENT, MACHINERY, PUMPS • FARM BUILDINGS
WEATHER INDEX INSURANCE (WII) • WII is a form of insurance that provides cover against the occurrence of a specific event e.g. drought. It uses satellite data to monitor the given weather pattern over a particular region. Based on this satellite data, the average rainfall is determined and during the season deviations from the set normal rainfall result in automatic payouts
How Does Weather Index Insurance Work? 1. Satellite estimation of rainfall over farmers’ fields (aggregated) for different locations in Zambia, based on GPS coordinates of reference points
How Does Weather Index Insurance Work? 2. Data is monitored regularly and compared to product triggers and other parameters. Typical events covered are dry spells, droughts, late onset of rains, early ending of rains, excessive rainfall. Scope to monitor floods too.
3. Once trigger thresholds are reached, the How Does WII Work? insurer is notified of the claim event and the claim is processed. Weather reports are shared regularly with insurer, reinsurer, MFI, input-supplier, farmers. All parties on same page regarding the weather data. Payout is made automatically based on the weather events (e.g. drought, dry spells). Payout typically made via Distribution channels.
POTENTIAL BENEFITS FOR FARMERS • Protection from weather events- reduces volatility of income over time; • Better and more sustainable access to inputs and credit; • Reduces burden of repaying input loan in bad years; • Easier access to farm inputs in bad years; • Allows farmers to replant and try again; • Gives access to other services (such as Life/Health insurance) and Value Add Services (e.g. weather advisories). 19
WHAT DID WE DO AND WHY? WHAT DID WE DO? WHAT WAS THE OBJECTIVE? Partnering with contract farming Scaling up is crucial and partnering with agri- buyer business is a route to scale up(bundling with credit) Sharing insurance premium Make product affordable, reward farmers, between farmers and agri- incentivise higher yields business Used Satellite technology Give insurance access to all farmers on an accurate basis Partnering with reputable regional Build internal capacity for sustainability of these and international reinsurers programs (claims paid on time hence increased client value) Customer education campaigns Understanding of insurance products, better relationship, lower side-selling Digital Claims Monitoring Speedy claim payouts 20
IMPACT OF THE PRODUCTS (2014-2017) • USD 600,000 in Premium (2014-2017) and USD 800,000 in Claims; • Farmers willing and able to pay premium without a subsidy. • Tool for incentive based contract farming (to encourage loyalty for farmer sign- up and renewals); • Tool for rewarding lead farmers or more loyal farmers and to influence planting and selling behaviour; • Positive feedback from farmers and field staff on Weather Index . 21
SUMMARY OF TYPES OF AGGREGATORS IN ZAMBIA TYPE OF AGGREGATOR CROP EXAMPLE Contract Farming Cotton, Soya NWK Agri-Services, Alliance Ginneries FISP Maize, general Drought E-Voucher scheme over 2 cover seasons Farmer organization Maize District Farmers Associations Input supplier Maize Seed and Fertilizer companies Bank Soya Financing farmer groups Outgrower scheme Legumes Growing Legumes as part of conservation farming Development agency Soya Part of youth program 22
CLIENT PROFILE/ HISTORY 2014/ 2015 FARMING SEASON No. Delivery No. Of Premium Sum insured Claims paid channel farmers (ZMW) (ZMW) (ZMW) ZNFU Lima 3000 95,735.00 4,109,400.00 1,400,000. Scheme 2015/ 2016 FARMING SEASON 3000 No Delivery No. Of Premium Sum insured Claims paid . channel farmers (ZMW) (ZMW) (ZMW) ZNFU Lima 6000 1,271,916.00 Scheme 335,786.00 8,654,294.00 WFP 500 104,969.00 846,525.00 No Pay-out Government 1750 110,170.00 FISP 104,973.00 2,164,400.00 ILO 500 89,708.00 1,848,000.00 200,000.00 NWK Emergent farmers 200 1,076,075.00 23,650,000.00 3,902,848.00
2016/2017 FARMING SEASON No Delivery No. Of Premium Sum insured Claims paid . channel farmers (ZMW) (ZMW) (ZMW) Government 2880 No Pay-out FISP 288,000.00 1,728,000.00 ILO 3000 214,193.00 403,053.00 4,856,065.00 WFP 2845 No Pay-out 850,000.00 5,032,021.00 Alliance Ginneries 1800 15,000.00 180,000.00 2,806.00 NWK 6037 12,692.00 153,099.00 1,837,200.00 FAO 1349 10,455.00 356,798.00 4,962,305.00 Mumbwa District Farmer 588 1,222,000.0 203,840 Association 0 61,000.00
2017/2018: Zambia Farming Season • All farmers under government’s; Farmer Input Support Program (FISP) insured through WII • 1 million farmers have been insured by Mayfair Insurance under this scheme • Use of electronic card e-voucher means that payouts once made to government will be made electronically to farmers on their e-voucher cards • This is government's first national insurance scheme 2017/2018 Number of Premium Sum insured Claims (ZMW) New and Farmers (ZMW) (ZMW) renewed contracts so far FISP 1,054,078 105,407,800.00 1,791,932,600. 58,141,176 .00 00 WFP 3835 1,122,200.00 7,212,549.00 1,270,251 NWK 1,301 26,020.00 455,350.00 14,430.50
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