Ipec drafts regulatory framework for agric insurance index implementation

THE Insurance and Pensions Commission (Ipec) is drafting a regulatory framework to implement agricultural index-based insurance that will provide insurance solutions for smallholder farmers vulnerable to climate change.

Ipec first announced the project in May 2023, saying it was a partnership with the International Finance Corporation (IFC).

The announcement followed the signing of a partnership agreement between Ipec and IFC three months earlier under the banner Agriculture Insurance Support Project.

The agricultural index-based insurance seeks to provide insurance solutions for smallholder farmers who are vulnerable to climate-related crop losses in Zimbabwe.

Given the country’s large agricultural sector, smallholder farmers make up the majority in the country who, unlike their commercial counterparts, are struggling to grow crops amid worsening climatic changes.

“Ipec came up with an agricultural index insurance policy paper which was approved by the government through the Ministry of Finance, Economic Development and Investment Promotion,” Ipec insurance supervision director Sibongile Siwela said in emailed responses to NewsDay Business.

“The policy paper will inform the regulatory framework, which Ipec is currently drafting. From the foregoing, it is evident that the project is progressing very well.”

She revealed that a team comprising representatives from the government, Ipec and the insurance industry had a knowledge exchange programme on agricultural index-based insurance in Kenya and Uganda last year.

“The two countries are some of the African jurisdictions that have successfully championed agricultural index insurance targeting smallholder farmers. IFC also provided capacity-building training for Ipec and the industry on agricultural index-based insurance,” Siwela said.

A local study conducted by Ipec showed that there is an appetite for agricultural index-based insurance from both the supply side and the demand side.

Findings from the study were presented to stakeholders in April.

“The project has gone very well and in line with its scope, which was anchored on three outputs, which are: a feasibility study on agricultural index-based insurance in Zimbabwe, capacity building of both Ipec and industry personnel and development of a regulatory framework,” Siwela said.

“Yes, the agricultural index insurance policy paper, which Ipec developed and was approved by the government is a key milestone achieved thus far. The policy paper will inform the regulatory framework that Ipec is currently developing.”

The regulator also revealed the enrolment of about 4 000 Goromonzi smallholder farmers in the pilot phase covering the 2023/24 agricultural season of the agricultural index-based insurance through the Farmer’s Basket product.

“Generally, the uptake of agricultural insurance is very low, especially among smallholder farmers. The sector contributes an average of 3% of the total gross premium written,” Siwela said.

“Most smallholder farmers do not insure their crops due to various reasons including, inadequate data to enable the pricing of the products, inappropriate insurance products, low levels of awareness of insurance as a risk mitigation tool and perceived complexity of insurance.”

She said, the agricultural index insurance project would go a long way in facilitating access to appropriate and affordable agricultural insurance for smallholder farmers.-newsday

Leave a Reply

Your email address will not be published. Required fields are marked *

LinkedIn
LinkedIn
Share