This document discusses ways to scale up agricultural micro-insurance in Africa. It notes that ACRE Africa provides localized micro-insurance solutions to reduce climate risks. However, more work is needed to incorporate risk reduction activities and make insurance demand-driven. Insurance should be one part of a financial education strategy that includes savings, credit, and risk reduction. Case studies show insurance can help farmers invest more and reduce distress after losses, but farmers still see insurance as risky. The document calls for bundling insurance with climate-smart agriculture, using data to improve products, and better linking insurance with farmer services and organizations.

1. Way forward: Scaling up
Rahab Kariuki
May 2017

2. About ACRE Africa
 Micro-insurance product designer linking
stakeholders to agricultural insurance through
localized solutions to reduce climate risks
 Transitioned from the five-year Kilimo Salama
project supported by Syngenta Foundation for
Sustainable Agriculture (SFSA)
 Offices present in Kenya, Rwanda and Tanzania
 32 staff with expertise in Insurance, Agriculture and
Veterinary Sciences, Actuarial Science, Marketing,
Strategy and Finance
Impact Investors
Founder and Main Shareholder

3. Source: World Bank, 2011

4. 1. We need to incorporate risk reduction
 Most insurance approaches do nothing to reduce risk. Perhaps they even introduce
moral hazard.
 Can insurance be more sustainable in the long term if coupled with practical risk
mitigation such as climate smart adaptation activities? More research is needed on
opportunities of bundling insurance with CSA
 Even insured farmers have a challenge coping with poor seasons. Our data shows that
50-70% of farmers insuring seed skip a season after a payout depending on how poor
the season was.

5. 2. Insurance is not demand driven yet
 Most index insurance programs since early 2000 have been developed and financed
by donors not risk carriers (insurers or local governments). Is the opportunity clear?
 What can be done to support insurance?
⁻ ICT and the data revolution can be harnessed to improve index insurance so it
better captures the risks that are important to farmers and for reduction of
basis risk.
⁻ Increase of capacity of support services such as Actuarial services, loss
assessment and farmer aggregation and collection of KYC information.
⁻ Index insurance can be better integrated into on-going climate adaptation and
climate service initiatives.
⁻ We need innovative ways to deliver index insurance products to farmers.

6. 3. Insurance is disproportionately promoted
 In general insurance should be used to deal with residual risk after other
mechanisms.
Savings Credit
Risk
reduction
Insurance
 Are we having a conversation with farmers about insurance? The Insurance
message should be included in Financial Education campaigns.
 Better linkages to farmers and their service organisations is needed so that
insurance schemes address knowledge gaps about the critical needs and
challenges of farmers regarding insurance.

7. 4. Farmers think Insurance is a risky decision

8. Scaling Agricultural Adaptation through Insurance- Some
success stories
1. ILRI-In northern Kenya, index-based livestock insurance payouts, following a
severe drought in 2011, reduced distress animal sales by 64% among better-off
pastoralist households. Among poorer households, receiving an insurance pay-off
reduced the likelihood of rationing food intake by 43%, and hence reduced long-
term health impacts on young children. Holding insurance increased the
probability of next-season herd size remaining above an estimated poverty trap
threshold of 16 animal units; and significantly decreased the probability that
children would be severely malnourished during a drought year.
2. R4 Rural Resilience Initiative in Ethiopia showed that insurance allowed farmers
to increase their savings, increase the number of drought animals, access more
credit, and invest more in inputs such as fertilizers and improved seeds, with
greater benefits going to female-headed households.
3. ACRE Africa reported that insured farmers in Kenya invested 19% more in farm
productivity, resulting in 16% more earnings compared to their uninsured
neighbours.

9. Thank You