THERE is a need for agriculture insurance against the risk of the climate yo-yoing – especially for communal farmers, the chief executive officer of the Namibia Financial Institutions Supervisory Authority says.
Kenneth Matomola said this during a consultative workshop to introduce agriculture index-based insurance in Namibia.
This is because Namibia is one of the countries most affected by climate change, which has resulted in poor grazing conditions and failed crops, he said.
“This poses severe negative impacts mainly to communal farmers, who either do not have access to and/or cannot afford traditional insurance to mitigate their risks,” Matomola said.
“The key objective of agriculture index-based insurance will be to reduce vulnerability, increase crop or livestock output, and to ultimately reduce volatility in the sector through the direct empowerment of the farmers,” he said.
The workshop aimed to introduce the concept of agriculture index-based insurance to insurers and underwriters from a regulatory point of view.
Index-based insurance is a new approach to insurance coverage, which pays an agreed amount upon the occurrence of a specified event of specified intensity.
The concept is also necessitated by the fact that, quite often, traditional insurance products and services do not offer tailor-made micro-insurance products and services.
The government often plays the mitigating role.
Matomola said even though the concept may sound foreign, some successful pilot projects have been launched in Africa and overseas.
Estimates of climate-change impacts on agriculture and fisheries suggest that Namibia could lose between 1% and 6% of its gross domestic product (GDP) annually.
Matomola said the agri-sector is highly vulnerable as it is more often exposed to weather-related hazards, leading to low levels of productivity.
“Similarly, this sector has experienced low access to credit facilities – especially the small-scale and communal farmers,” he said.
Namibia is classified as a semi-arid country characterised by erratic rainfall patterns, and this is likely to impact the livelihood of individuals and farmers for years to come.
Therefore, finding a risk-management solution to the devastating losses experienced by Namibian farmers is key to sustainable farming practices.
“Hence our resolve to systematically introduce the concept of agriculture index-based insurance to the market,” he said.
The concept also aims to cushion the losses experienced due to natural disaster-related events, such as drought, by spreading the risks among various stakeholders when an adverse event occurs.
The study suggested that there is a market for agriculture index-based insurance in Namibia.
The outcome of the study was presented to the minister of finance, who granted the authority permission to engage key stakeholders to strategise on the way forward.