Willis TW, Jubilee in African microinsurance launch

Willis TW, Jubilee in African microinsurance launch

A new microinsurance project focused on farmers in Sub-Saharan Africa has been launched, with support from broker Willis Towers Watson and insurer Jubilee.

The hybrid insurance and credit initiative, aimed at increasing food supply chain resilience, particularly for climate risk, is being launched this week at the World Economic Forum in Davos, Switzerland.

WINnERS is being piloted in Tanzania, with plans to implement throughout Sub-Saharan Africa by 2020.

A quarter of a billion farmers are not integrated into commercial supply chains, representing a $50bn funding gap.

The project has EU funding through the European Institute of Technology’s ClimateKIC project, with co-funding from the World Bank, and led by academics from Imperial College London.

The scheme is being supported by World Food Programme’s Farm to Market Alliance and other commercial partners.

“By 2050, the world will be home to some 9.7bn people and it is expected that food production will need to double by this time to accommodate this steep rise in population,” said Professor Sir Gordon Conway, senior advisor to the WINnERS project and chair in international development at Imperial College London.

“Over half of the world’s crop production is produced by smallholder farmers, yet these farmers, particularly those based in sub-Saharan Africa, are trapped in a cycle of low crop productivity and are often excluded from the possibility of financing due to their risk profile,” he added.

A press release said it aims to create “insurance infrastructure whereby each party in the supply chain is insured against crop loss, unlocking access to investment capital for farmers”.

The project’s Imperial College academic backers claim its success could triple maize yields in developing economies.

“Were WINnERS rolled out across East Africa, the GDP impact of this rise in maize yield would be an increase of as much as 8.6%, contributing more than $24.6bn to the East African economy,” said the release.

“Across Sub-Saharan Africa as a whole, the WINnERS impact on maize yield is projected to improve GDP by 2.6%, equating to an approximate economic benefit of $62.9bn, improving the lives of millions,” it continued.

Targeting a quarter of a million smallholder farmers over the next two to three years, it aims to add 2% to Tanzanian GDP annually, an increase in production value of almost $900m.

“The positive impact would be magnified considerably by the uptick in production of additional crops and the concomitant increase in bank lending activity,” said the release.

Supply chain benefits through fewer losses to international businesses are expected globally, it added.

“The sole aim of WINnERS is to create a sustainable and commercially viable system that will protect farmers against the uncontrollable impact of global warming whilst increasing farm productivity and revenue across the supply chain and unlocking financing options,” Conway said.

The insurance contract is a single policy covering the weather-driven production losses of a number of farmer organisations, each one pooling many farmers.

Insurance premiums are collected nationally by the Private Agricultural Sector Support trust, which transfers them to Jubilee Insurance, to purchase a policy placed by Willis Towers Watson in the international re/insurance market.

Farmers contribute to the insurance policy when they take out loans from local banks, including NMB, CRDB and Akiba, to purchase inputs, for example to buy seeds and fertilisers for growing crops.

Bundling the policy with a loan agreement is the “key innovation” cited to give credit enhancement for the farmer, allowing banks to extend loans to farmers with limited credit history or limited resources to post cash collateral.

For insurers, aggregation of small farmers via farmer organisations in turn aggregated under the same policy improves the predictability of expected pay-outs via spatial diversification, the project noted.

“This brings down insurance costs and makes the scheme commercially viable,” said the release, noting that most existing insurance programmes in the region need to be heavily subsidised to make them commercially viable.

Erik Chavez, executive director and lead investigator of the WINnERS project and a research fellow at the Centre for Environmental Policy at Imperial College London, added: “Our roll-out in Tanzania is demonstrating a new paradigm for the global supply chain and, at Davos, we have been discussing our plans to implement the project across Sub-Saharan Africa with potential insurance, banking, retailing and manufacturing partners, as well as with key governmental stakeholders.

“Creating a truly sustainable supply chain will have a transformational impact for farmers, traders, end buyers, such as manufacturers or food retailers – and, indeed, for society as a whole.”

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