The 9th Consultative Forum came to a close this Tuesday, March 14, in Singapore, after an afternoon of discussions among supervisors, policymakers and the insurance industry in the Asia Pacific region on the challenges and potential of insurance to reduce the vulnerability of smallholder farmers against disasters and climate risks. Fifty participants from 14 countries were in attendance.
Hannah Grant, Head of Secretariat of the Access to Insurance Initiative (A2ii), closed the Forum highlighting that there is now greater recognition and political support, both nationally and internationally, for agricultural insurance as a tool for managing disaster and climate risks.
“Coordinated action by all stakeholders – insurance supervisors, policymakers, industry practitioners – should continue in order to address the challenges of successfully implementing and scaling up agricultural insurance for smallholder farmers, and to ensure it delivers client value”, highlighted Ms. Grant.
Panellists shared their experiences with both indemnity and index-based agricultural insurance. They drew specifically on the cases of India, Kenya, Sri Lanka, Thailand and the Philippines, and highlighted the benefits of agricultural insurance: By sharing the risk with the industry, agricultural insurance allows better management of risk and, when conducted at the sovereign level, better government finances. Panellists underlined that efficient risk-sharing arrangements between individuals, communities, regional government and sovereign levels are increasingly possible given developments in digital technologies, technical knowledge and global risk markets.
Implementation challenges discussed at the Forum included:
- Product customisation to farmers’ needs and linking to the agricultural value chain, given the volatility and diversity of the agricultural sector.
- Availability and quality of data, which often rests with government agencies and is not publicly available or recorded in a form that is suitable for insurance purposes.
- Effective delivery, where processes such as claims and enrollment are done in a timely manner, given the reliance on community or local organisations.
- The appropriate role of long-term state subsidies in providing sustainable agricultural insurance for smallholder farmers.
- Increase in the use of technology – such as satellite data and mobile insurance – to make index insurance more cost-effective and scalable in the long run.
Insurance supervisors have an important role to play in providing an enabling environment, but there is currently no widely accepted approach to supervising index insurance: “Is index insurance actually insurance, or a derivative? How should insurable interest be defined? How should pilot projects be supervised in a proportionate manner, particularly while encouraging innovation?”, asked Craig Thorburn of the World Bank.
In most countries in Asia and Africa, we still see very little in terms of a framework for assessing and approving index insurance products,” remarked Agrotosh Mookerjee of Risk Shield Consultants, highlighting the need to improve supervisory understanding of the complex nature of index insurance.
“Policymakers, insurers and regulators should sit together to develop new strategies and index-based insurance solutions”, advised Dr. Yoshihiro Kawai, Secretary General of the International Association of Insurance Supervisors (IAIS). He noted that "the IAIS is currently drafting new supervisory guidance on index-based insurance to contribute to this important dialogue".
A conference report will become available in April.
Forum Agenda and Presentations: https://a2ii.org/en/event/9th-consultative-forum-topic-exploring-challen...
Pre-event press release: https://a2ii.org/en/insurance-supervisors-policymakers-and-industry-gath...
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