Agricultural Insurance Market Assessment
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The International Finance Corporation The World Bank Group Private Sector Investment to Build Climate Resilience in Niger’s Agricultural Sector: Agricultural Insurance Market Assessment Final Report For public release March 2013 Submitted by RMSI A-8, Sector 16 Noida 201301, INDIA Tel: +91-120-251-1102, 2101 Fax: +91-120-251-1109, 0963 www.rmsi.com Contact: Uttam Singh, Senior Technical Specialist Email: [email protected] Private Sector Investment to Build Climate Resilience in Niger’s Agricultural Sector: Agricultural insurance market assessment NB: Names of institutions, companies, projects and products in the report have been replaced with letters e.g. Company A, B, C or Product 1, 2 3 in order to maintain confidentiality of entities, projects and products involved. For the attention of: Wambui Wairimu Chege Anthony Mills Task Team Lead Task Team Lead International Finance Corporation International Finance Corporation 14 Fricker Road, Illovo, 2196 14 Fricker Road, Illovo, 2196 Johannesburg, South Africa Johannesburg, South Africa Email: [email protected] Email: [email protected] Final Report Confidential Page 2 of 149 Private Sector Investment to Build Climate Resilience in Niger’s Agricultural Sector: Agricultural insurance market assessment Preface The IFC (International Finance Corporation) Advisory Services in Africa as part of the pre- implementation phase of the “Private Sector Investment to Build Climate Resilience in Niger’s Agricultural Sector” has undertaken three investment projects with the financial support of Strategic Climate Fund (SCF) under the PPCR program for Niger. The PPCR focuses on piloting interventions in developing countries for managing climate-induced risks and building climate resilient agriculture. The PPCR is structured into two phases. Phase 1 will support the preparation of a Strategic Program for Climate Resilience (SPCR), which aims to integrate climate resilience into national priority development plans, budgets and investments. Phase 2 will focus on the implementation of the SPCR, specifically on programmatic support, investment in priority sectors, and support to on-the-ground adaptation activities identified during Phase 1. In the context of the Niger SPCR, the following three investment projects have been identified by the government, multilateral development banks, and other stakeholders: Project for the Mobilization and Development of Water Resources (PROMOVARE), led by the African Development Bank. Climate Information Development and Forecasting Project (PDIPC), led by African Development Bank. Community Action Project for Climate Resilience (PACRC), led by the World Bank. IFC is responsible for sub-components of the above projects that focus on engaging the private sector in the PPCR and catalyzing investment in climate change adaptation activities. For Niger, increased climate resilience and improved food security are closely interlinked. Unless adaptation measures are put in place, climate change is likely to increase the risk of famine and social collapse. Towards building climate resilience in Niger’s agricultural sector through mobilizing private sector, investigations in three areas through engaging consultant was taken up in the below mentioned areas. 1. Increasing the use of improved irrigation systems and introducing climate resilient seeds to farmers; 2. Creating a climate information platform for agricultural producers and other stakeholders such as insurance providers; and 3. Developing insurance products suitable for SMEs active in the agricultural sector with opportunity to extend insurance benefits to small-scale farmers and livestock holders. The present study pertains to point 3 above and focuses on the development of weather index based insurance for crops and livestock in Niger. Such insurance will increase the resilience of the agricultural sector (including small-scale farmers and livestock holders) to climate change impacts. This study analyzes the feasibility of weather index based insurance in Niger and provides recommendations for the development of sustainable market interventions for the agricultural sector in Niger. The study also involves conducting a needs assessment and the feasibility of introducing the required crop insurance products in the country. Final Report Confidential Page 3 of 149 Private Sector Investment to Build Climate Resilience in Niger’s Agricultural Sector: Agricultural insurance market assessment Acknowledgements RMSI and ACTUARIA would like to acknowledge and sincerely thank the Honorable Minister of Planning Dr. Amadou Boubacar Cisse for taking out time and initiating the project discussions with various stakeholders and the project team. We also thank the Ministry of Agriculture and Ministry of Planning, Niger for providing support and introducing the project team to various public and private stakeholders. We appreciate the effort of Mr. Dan Bakoye Chaibou, the country focal point of this study, who has extended his supported and facilitated meetings with various stakeholders during the country mission for the stakeholder consultation and data collection. We also thank Mr. Abdou Noma, Director of Insurance Control at the Ministry of Finance and Mr. Djibrilla Balo of the Insurers’ Committee for providing information about the insurance sector in Niger and introducing us to the insurance companies in the country. Special gratitude is extended to various government departments particularly the Agriculture Department, Meteorology Department, Chamber of Commerce, Livestock Department, INRAN, ONAHA, various financial institutions, insurance companies, insurance brokers, farmer’s cooperatives, NGOs, and agri-business organizations in Niger for sharing information to execute this study. The farmers, who met team met in the six regions and took out time to provide information during the questionnaire survey, also deserve appreciation. We are grateful to Mr. Anthony Mills and Ms. Glwadys Gbetibouo, for providing their valuable advice and comments during all the stages of the project. We also appreciate the colleagues of IFC Africa office who were involved in the discussions during the finalization of our recommendations of the study. The following team of IFC staff and consultants was involved in preparing this report. IFC: Mr. Anthony Mills (Task Team Lead and technical expert) and Ms. Glwadys Gbetibouo (technical expert), Noleen Dube (ex-IFC Task Team Lead), Wambui Wairimu Chege(Task Team Lead) and Russell Sturm (Technical Expert) RMSI: Dr. Uttam Singh (Team Leader and Agro-metrological expert), Dr. Muralikrishna, (Project Manager and Social Science Expert), Dr. Abdellatif Khattabi (Agro economist), Mr. Saidou Amadou Moussa (Field support), Mr. Tapas Roy (Data Analyst), Ms. Minal Swant (Vulnerability Expert) and Upamanyu Mahadevan (Technical Editor). ACTUARIA: Denis Chemillier-Gendreau (Actuarial science expert) and Alexandre Foulon (Insurance and Finance expert) The principal authors of this report are Dr. Uttam Singh, Mr. Alexandre Foulon and Dr. Muralikrishna. Final Report Confidential Page 4 of 149 Private Sector Investment to Build Climate Resilience in Niger’s Agricultural Sector: Agricultural insurance market assessment Table of Contents Preface ................................................................................................................................. 3 Acknowledgements ............................................................................................................ 4 List of Figures ..................................................................................................................... 8 List of Tables ..................................................................................................................... 10 Acronyms Used ................................................................................................................. 12 1 Executive Summary ................................................................................................... 14 2 Objectives and Study Area ........................................................................................ 16 3 Methodology .............................................................................................................. 17 3.1 Identification of Data Elements ............................................................................. 17 3.2 Information Collection and Compilation ................................................................. 17 3.2.1 Literature Review and Data Collection ........................................................... 17 3.2.2 Questionnaire Survey among Farming Communities ..................................... 18 3.3 Data Analysis and Validation ................................................................................ 18 3.3.1 Hazard Analysis ............................................................................................. 19 3.3.2 Vulnerability Analysis ..................................................................................... 20 3.3.3 Market Analysis for Insurance ........................................................................ 21 4 Climate Change Vulnerability and Risk Analysis in Agriculture Sector ................. 22 4.1 Assessment of Existing Agricultural and Climate Data in Niger ............................. 22 4.1.1 Data Status in Niger for Development of Index-based Insurance Products .... 22 4.1.2 Investment Cost and Feasibility Analysis for Developing Commercial Index- based Products ...........................................................................................................