The agricultural insurance sector remains underdeveloped in Africa despite the immense wealth of opportunities it offers in a context of an increase in extreme climatic events, underlines a report published by Ecofin Pro, the professional platform of the Ecofin agency. .
The report specifies that this segment of the insurance market is still embryonic on the continent. Barely 1% of small African farmers were insured in 2016/2017 (editor’s note: reference year of the study) compared to 15% in Latin America and almost 50% in Asia. According to Allianz Re data, agricultural insurance premiums reached $320 million in Africa in 2020, or less than 2% of total non-life insurance premiums.
Globally, Africa is a little thumb in terms of agricultural insurance. It represents less than 1% of premiums estimated at $46 billion in a market dominated by the United States and China, which together have $27 billion in premiums.
In addition to its small size, the African agricultural insurance market is very unevenly distributed. South Africa is by far the continent’s largest market, with more than $100 million in premiums in 2020.
The rainbow nation is followed a long way by Morocco and Botswana, which have bonuses of between $20 million and $40 million. The other two markets with premiums exceeding the $10 million mark are Zambia and Nigeria.
The report also indicates that agricultural insurance has been very popular among governments, who see it as a way to limit the impact of disasters on the income of small producers and to strengthen the resilience of communities in a context of change. climatic. With the support of certain private players in the insurance sector and international organizations, various initiatives have flourished in many countries on the continent, especially in index insurance which is perceived as more relevant for managing the climate risks that weigh on the production.
Alongside the public sector, private insurers can play a leading role in the development of agricultural insurance. With extreme events on the rise due to climate change, there will be a greater need to help the agricultural sector cope with increased risks to food security.
The latest FAO assessment report shows that 8% of agricultural GDP was affected between 1991 and 2021 by extreme weather events such as prolonged droughts and floods, double that of Asia and a level slightly higher than recorded in Europe and America (7.5%). This considerable damage shows that opportunities exist for insurers to develop products adapted to the needs of African producers. In this context, agricultural microinsurance constitutes a promising niche that can reach low-income players on the African continent, which is home to 51 million farms, 80% of which have an area of less than 2 hectares.
According to the Microinsurance Network’s “State of Microinsurance 2022” report, co-published with the Munich Re Foundation, the potential value of the agricultural microinsurance market in Africa could reach $7 billion in Africa.
By AJ.SEditorial Committee
