This webinar looked at how governments can catalyse the development of agriculture insurance markets through a variety of interventions such as the provision, administration and management of subsidies, support for developing infrastructure for effective implementation of insurance programmes, investment in collection and sharing of data and customer education. It also looked at the government's role in developing enabling regulations and using insurance as a part of their social protection and agriculture development agendas. This webinar was organized together with the WBG's Global Index Insurance Facility, the USAID & Basis/I4-supported Global Action Network for agriculture insurance. Speakers: Lena Heron (USAID), Peter Wrede (the World Bank) and Vincent Tithinji Ngari (Government of Kenya).

1. The role of governments in scaling up
agriculture (index) insurance

2. Interfacing with the webinar system
2
Tell us what you think. Type
your questions/ comments
here even while the
presentation is going on.
Our presenters are shown here
This shows all current participants
Polls will also be opened
during the webinar –
participate by clicking on
your answers

3. 3
Trends impacting rural and
agricultural finance & insurance
• Upsurge of private investments in agri-food sector
Demand on agricultural
produce & new
consumption patterns
• Increase in remittance flows, 30-40 % goes to rural areas,
most of which is involved with agriculture linked activities
Migration
• Threat for rural communities and farmers, e.g. 95% of
African agriculture or 60% of agriculture in India still
depending on rain
Climate Change
• Revolutionizing provision of rural financial services 
1.7 billion of the 2.5 billion people still lacking access to
finance have a mobile phone – new channels
• Value Chains can reduce the risks of agricultural finance
and enhance creditworthiness of small farmers.
Aggregation possibilities too
Innovation:
Technology
Value Chain Financing

4. The role of governments in scaling up
agriculture (index) insurance
4
Presenter:
Peter Wrede
World Bank Group
Presenter:
Vincent Githinji Ngari
Government of Kenya
Presenter:
Lena Heron
USAID
Facilitator:
Pranav Prashad
Impact Insurance Facility
4

5. Disaster funds
Insurance
(international) humanitarian assistance
Poll 1: To deal with agricultural shocks,
should governments best rely on…
5

6. Perspectives on the role of governments
in scaling up agriculture (index)
insurance
6
Peter Wrede

7. Agriculture Risk Deserves Attention!
7
FOOD
SECURITY
The world’s
poorest live
in rural
areas
Agriculture
is the largest
sector in
developing
countries
Low Levels
of
Productivity
Food
INSECURITY
and Food
DEPENDENCY
3.1 billion people live in
rural areas,
representing 70% of the
world’s poorest people
Agriculture employs
1.3 billion people
globally, of which
97% are in
developing countries
 cereal yield is 1.1
ton per hectare East
& West Africa
compared to 2.7 tons
in North Africa & 3.7
tons in Asia
Climate Change and
increasing weather-
related disasters will
further affect food
security
Take Africa,
• where agriculture contributes
50% to total export value and
21% to GDP
• where irrigation is scarce and
exposure to drought is high
• where small shifts in
temperature and rainfall have
disproportionate impacts on
production
• Take Cameroon, where a 14%
reduction in rainfall is estimated
to cause US$ 4.65 billion
economic losses
Underinvestment in agricultural
inputs results in low crop yields in
the developing world

8. What Governments Already Do
2011
2007

9. What Governments Already Do
9
• Input subsidies including finance
• Minimum producer prices
• Emergency / disaster relief
• Loan forgiveness
• Premium subsidies
• Subsidies for operating costs
• Reinsurance
• State owned / initiated insurers
• Regulation of index insurance
• R&D, training
• Provide data (meteorological, yield)
• Micro / insurance / awareness
• Promote public private partnerships
Estimated Government Subsidies as
Percentage of Producer Premium, 2007

10. Example Risk Market Infrastructure for II
10
Key functions
Premium volume per farmer or herder
Low
(e.g. low-income
countries)
High
(e.g. high-income
countries)
Enabling legal and regulatory framework
Public sector
functions
Public sector
functions
Consumer protection
Public information campaigns
(Compulsion/Nudging)
(Public insurer of last resort)
(Insurance premium subsidies)
(Offer indexed social safety net)
Index definition
Public or private
sector functions, but
coordination may be
efficient
Private sector
competition can be
efficient
Index financing
Index data collection and auditing
Index database management
Historical analysis of index/technical pricing
Access to international reinsurance markets
Product design (using common indices) Private sector
competition can be
efficient
Commercial underwriting and pricing
Distribution/Delivery
RISK MARKET INFRASTRUCTURE IN LICS

11. What Governments Can Do (more of)
11

12. How Governments Can Be Helped
12
Some examples of support provided by the WBG:
• India transformation
• CIMA, Kenya and Uganda regulation
• Mongolia innovation
• West Africa weather stations
• Mozambique product design & process orchestration
• Kenya innovation
• Uruguay, Argentina, Guatemala, DR macro-level feasibility
• Bangladesh fiscal & welfare evaluation of options
• South Africa inform policy decisions
• Weather grids in DR, Mozambique, and Central America
as well as agriculture risk assessments in many countries

13. Premium Subsidy Revisited – Be Smarter
Smarter
13

14. For everyone
For vulnerable farmers & pastoralists
Not at all
Poll 2: Should agriculture insurance
premium be subsidised
14

15. 15
Government involvement in the
Kenya Livestock Insurance Program
Vincent Githinji Ngari

16. Case for insurance
16
• Kenya remains vulnerable to frequent and extremely expensive
natural disasters;
• High frequency of flooding (every year) and drought (every 2-4
years);
• 2000 – 2011: Government of Kenya spent on average KES 4.2
billion on post-disaster relief per year;
• 2008 - 2011: Total drought losses to Kenyan economy: KES 968.6
billion and reduction of GDP by 2.8% each year. 72% of this loss is
related to livestock;
• Severe droughts results in upto 9% mortality of livestock;
• It is a policy of current Government to use insurance intervention
to cushion pastoralists from the effects of drought.

17. Project Area and Livestock Wealth
17
Kenya ASALs Livestock Wealth
• 14 target ASAL pastoral
counties have;
• 9.16 M cattle= 52.5%
• 13.50M sheep= 78.8%
• 21.03M goats= 75.8%
• 2.96M camels= 99.6%

18. Impact of Drought on Key Sectors
of the Economy
18
• Systemic Drought exposure: 28 Droughts
last 100 years, 4 in last 10 years
• Frequency and Intensity increasing
• 2008 -2011: 4 consecutive years drought:
– Total value damages and losses US$
12.1 billion
– Agriculture US$ 1.51 billion (12.5%)
– Livestock US$ 8.74 billion (72.2%)
– 9% national livestock herd died –
mostly cattle
• Food Insecurity due to drought:
– 2009 = 3.8 million people
– 2011 = 3.75 million people affected,
• 1.8 million in marginal crop areas
• 1.9 million people in marginal
pastoral areas
12.5%
72.2%
0.4%
0.7%
0.5%
0.7%
0.4%
3.3%
9.1%
0.1%
Agriculture
Livestock
Fisheries
Agro Industry
Health
Nutrition
Education
Energy
Water and sanitation
Environment, tourism
etc

19. Centrality of Livestock Economy
and Risk Profile
19
1. Livestock is the principle asset and key source of income
2. Pastoralists carry a heavy risk burden of which severe drought is the greatest
3. Drought-related livestock mortality is the greatest source of vulnerability

20. Design of the KLIP
20
• Forage availability as determined by satellite data will
trigger payout. Asset protection cover;
• National government provide (as a start) 100%
premium support for 5 tropical livestock units (TLU)
belonging to vulnerable pastoralists;
• The insurer and beneficiaries will make arrangements
for top up and voluntary cover;
• The insuring company will make payouts directly to
the accounts/mobile payment systems of the
beneficiaries when there is a trigger

21. Use of NDVI data
21
Green
Good forage availability. This is
above normal and stable forage
condition.
Yellow
The forage situation is positive but
consistently worsening.
Orange
The division in question is under
considerable stress but not yet
serious.
Red
Drought situation is serious but not
yet classified as severe.
Black Severe drought condition.

22. KLIP Investment Plan
22
Year 14/15 15/16 16/17 17/18 18/19 19/20
Total Budget 85 131 400 1,095 1,080 1,128
Premiums Budget KES
(M)
56.1 100 342 770 770 770
% investment to
beneficiaries
66.0 76.3 85.5 70.3 71.3 68.3
% Capacity building,
O&M
34 23.7 14.5 29.7 28.7 31.7
Max Potential Payout
KES (M)
351 636 2,175 4,900 4,900 4,900
H/H 5,012 9,085 31,070 70,000 70,000 70,000
No of people 30,072 54,510 186,420 420,000 420,000 420,000
% of Human Pop in
ASAL
0.4 0.7 2.4 5.4 5.4 5.4
TLU 25,060 45,425 155,350 350,000 350,000 350,000
% TLU in ASAL 0.15 0.3 0.9 2.1 2.1 2.1

23. Role of State and Local Governments
23
• Creation of conducive policy, regulatory and business
environment;
• Resource mobilization for programs that increase the
reach of insurance to citizens;
• Capacity building/awareness creation of stakeholders;
• Private sector mobilization;
• Development of supportive infrastructure (eg, roads,
ICT systems);
• Data collection and management;
• Developing risk management programs that
complement insurance

24. Challenges
24
• Lack of an electronic registration system for
information management, managing payouts and
communication;
• Inadequate knowledge on insurance, as a risk
management tool, by policy makers, extension staff
and pastoralists;
• Inadequate local expertise to develop index
insurance tools;
• Limited banking network/mobile for payment
distribution

25. Yes
No
Poll 3: Can agriculture insurance be expected to mitigate
the risks that climate change poses to small scale
farmers in developing countries?
25

26. 26
Lena Heron
Government as enabler and user of
insurance instruments

27. Local capacity to design and market appropriate products
Thin data environment which makes design difficult and
drive up premium costs (do to uncertainty)
Low/no initial volume prevents private sector entry (first
mover)
Weak distribution channels
Uninformed consumers
Some constraints to insurance market
development in LICs
27

28. Government role in insurance market
development
Enabler
Legislative and regulatory
framework;
Oversite including
consumer protection;
Consumer education and
outreach;
Data—especially production
and loss.
User of Insurance
Insurance as component or
extension of safety nets for
increased resilience.
Insurance to support
agricultural development
objectives—increase farmer
investment in productive
technologies.
28

29. Not all insurance products offer equal
protection, even at the same price. . .
If government subsidizes
insurance, it should take care
to consider options and select
instruments to maximize
objectives.
Governments should consider
client value or “safe minimum
standards”, when reviewing
insurance products.
29

30. Governments (the public sector)
Insurance companies (the private sector)
Both in cooperation
Poll 4: Is the development and scale of
agriculture insurance best achieved by…
30

31. Use of index insurance require close partnership between
government, insurers, research, and development partners to
develop and improve insurance tools, products and services
for resource poor farmers and herders
Governments have an important role -both as enabler and as
a user of insurance instruments. Without strong public private
partnerships, we are unlikely to see insurance as a viable tool
to manage risk is LICs
Governments function differently than private sector
companies, but for agriculture insurance, both sides are well
advised to make the effort to understand each other and
meet at eye level
Concluding thoughts
31

32. The role of governments in scaling up
agriculture (index) insurance
3232
Peter Wrede
World Bank Group
Vincent Githinji Ngari
Government of Kenya
Lena Heron
USAID
Pranav Prashad
Impact Insurance Facility

33. Effectiveness of NDVI and other remote sensing techniques as against
on ground weather stations. Would a combination work better?
‒ Other Challenges with NDVI- converting images to numerical data
Effectiveness and efficiency of new technologies like drones
Role that the government can play in combining index products with
additional services (e.g. better agri. inputs), access to credit and
government DRM programs
‒ How can these deliver better value for the clients
Snap-shot of chat-box discussions
33

34. How can government interventions help farmers to increase their
investment in productive techniques and technologies? What is
required to make it effective?
Role for reinsurers in helping governments implement large
programmes
34
Snap-shot of chat-box discussions contd.