Climate risk insurance was spotlighted during a side-event hosted by PARM/INSURED at the COP27 IFAD pavilion in Sharm el-Sheikh on 17 November, Solutions Day. Experiences on premium financing and subsidies were shared from the work of INSURED and its partners. INSURED is financed by the Swedish International Development Cooperation Agency (Sida).
Moderated by IFAD’s Lead Regional Technical Specialist in Rural Finance, Markets and Value Chains, Mr Marc de Sousa Shields, the panel debate was titled “Strengthening farmers’ resilience through climate risk insurance: Who pays and how?” The aim was to share knowledge and discuss lessons learned on insurance as a tool to build resilience for small-scale producers, and to explore innovative approaches to boost affordability and take-up.
Three international experts took part in the debate, namely Ms Rose Goslinga, President and Co-founder of Pula Advisors; Mr Munyaradzi Daka, Technical Manager of the Agro Consortium (AIC) in Uganda; and Ms Tara James, INSURED Climate Risk and Agricultural Insurance Specialist.
The panellists shared perspectives from the private sector, national government and international development agencies. They discussed the pros and cons of premium subsidies, including different premium financing models, such as instalment payments, targeted subsidies, private sector pre-financing, and the challenges and opportunities for different stakeholders.
Innovative forms of premium financing are vital to make climate risk insurance affordable and accessible to small-scale producers. Experiences shared from Guatemala, Kenya, Uganda and Zambia also demonstrated how crucial it is to build private-public partnerships and involve multiple stakeholders in the design of effective insurance schemes.
Climate risk insurance plays a key catalytic role in strengthening small-scale producers’ resilience to potentially devastating risks – including drought, heatwaves, pests and diseases. However, current levels of insurance coverage are shockingly low. Globally, less than 20 per cent of smallholder farmers have agricultural insurance, and that number is less than 3 per cent in sub-Saharan Africa.
Making climate risk insurance work for smallholder farmers is the focus of INSURED and a growing strand in IFAD’s drive to foster resilience. Insurance compensation following shocks and losses boosts small producers’ households food security, helps stabilize rural economies, and strengthens the resilience of the food systems we all depend on.
Over 350 people registered for the panel (online and in-person). There was lively interaction with the panellists during the session, which turned out to be truly engaging.
Ms James summed up her takeaway message for the audience: ‘It’s important first to understand the needs of smallholder farmers and whether insurance is actually solving a problem,” she said.
“Then we can focus on the design and also combine insurance tools with other development actions, by cooperating with all the stakeholders involved. And only then, can we have a good answer to the question “who pays and how?”