Index Insurance

The A2ii Secretariat is proud to share with you the first edition of the A2ii policy notes: These notes will inform policy-makers, the international development community and other interested stakeholders about the importance of insurance regulation in supporting the achievement of international development objectives.

This first edition “How agricultural insurance can improve food security – and why regulation matters” makes the case for agricultural insurance in the context of food security, explains the role of regulation to make effective risk protection work and highlights some of the challenges in regulating innovative index-based insurance approaches.

Adverse weather events cause heavy losses to farmers every year and contribute to rural poverty. While traditional insurance is too expensive for most smallholder farmers, index-based agricultural insurance has the potential to offer a promising solution with lower premiums and faster payouts. However, key barriers still need to be addressed and most products are still in pilot stage. An area that has not received much attention yet is the essential role that regulation and supervision play in supporting and enabling wider access to index-based agricultural insurance products. The paper provides an overview of the benefits of agricultural insurance, explains why regulation matters and highlights some of the challenges faced by supervisors when seeking to regulate index-based agricultural insurance.