ACRE Africa Sustainable Agriculture through Agriculture Insurance Rahab Kariuki, May 2017

Contents About Acre Africa Introduction to Agriculture Insurance and KPIs Why index insurance? A few challenges of scaling agriculture insurance Conclusion

About ACRE Africa Founder Micro-insurance product designer linking stakeholders to agricultural insurance through localized solutions to reduce climate risks Licensed insurance intermediary, supporting local insurers to offer smallholder-focused insurance across value chains Offices present in Kenya, Rwanda and Tanzania 32 professional staff with expertise in Insurance, Agriculture and Veterinary Sciences, Actuarial Science, Marketing, Strategy and Finance Impact Investors

Acre Africa’s Role on the Value Chain

Source: World Bank, 2011

Available Products in East Africa MPCI- inspection based yield guarantee Livestock Index Based Insurance Seed insurance, Season weather and Area Yield index Dairy Insurance-Indemnity based Hybrid- Index and MPCI

Why Index Insurance? According to FAO 80% of farmland in sub-Saharan Africa and Asia is managed by Smallholders. While 75% of the world’s food is generated from only 12 plants and 5 animal species, making the global food system highly vulnerable to shocks. Index insurance is a relatively new but innovative approach to insurance provision that pays out benefits on the basis of a predetermined index (e.g. rainfall level) for loss of assets and investments African economies rely on agriculture

KPI: Premium per life is high for Agriculture Source: State of Micro insurance 2016, Micro insurance Network

KPI: High Aggregate Claims Ratio Ratios were calculated as claims paid over gross written premiums Source: State of Micro insurance 2016, Micro insurance Network

Challenge 1: “Insurance is sold not bought”, but farmers do not trust insurance sales men. Regulatory framework does not allow unlicensed parties to distribute insurance Applied for an exemption in Kenya to allow agro input shops Roles played by Agro-input shops: Premium aggregation Product Information Registration of insured Hold a physical master policy document for reference

Challenge 2: Insurance is not incorporating risk Reduction Most insurance approaches do nothing to reduce risk. Perhaps they even introduce moral hazard. Even insured farmers have a challenge coping with poor seasons. Our data shows that 50-70% of farmers insuring seed skip a season after a payout depending on how poor the season was.

Challenge 3: Insurance is not demand driven yet Most index insurance programs since early 2000 have been developed and financed by donors not risk carriers (insurers or local governments). Is the opportunity clear? What can be done to support insurance? ICT and the data revolution can be harnessed to improve index insurance so it better captures the risks that are important to farmers and for reduction of basis risk. Increase of capacity of support services such as Actuarial services, loss assessment and farmer aggregation and collection of KYC information. Index insurance can be better integrated into on-going climate adaptation and climate service initiatives. We need innovative ways to deliver index insurance products to farmers.

An Introductory Micro Insurance Product Leveraging on Existing Seed Distribution SMS unique code to short code Register  Opens bag on planting, finds card inside 2 1 Purchase  Farmer prepares for beginning of season At start of season farmer purchases insured bag Full season cover Compensation sent to farmer via mobile money 4A2 Successful germination= automatic full season cover Insured-Season  4A1 the Insurance Provider gets farmer location from location based service system which locates phone, and monitors satellite imagery for that location 3 In the case of germination failure after 21 days without rain Compensation sent to farmer via mobile money if no rainfall in location 4B1 So that farmer can replant and harvest the same season Replant  4B2

Contact us: enquiries@acreafrica.com www.acreafrica.com