By Rosemary Onuoha
THE National Insurance Commission, NAICOM, has said that the Index Based Agricultural Insurance, IBAI, will expand insurance products for agricultural lending from the current coverage of 0.5 million to 3.8 million agricultural primary producers.
Director, Inspectorate of NAICOM, Mr. Barineka Thompson, who disclosed this at a seminar for insurance journalists in Benin, Edo State, said that IBAI is a relatively new financial instrument for transferring agriculture risks from individuals or groups of farmers to (international) risk carriers (Insurers).
Thompson said, “Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) is looking to expand insurance products for agricultural lending from the current coverage of 0.5 million to 3.8 million agricultural primary producers. The insurance facility Pillar is designed to expand insurance products for agricultural lending to agricultural primary producers and help reduce credit risks and increase lending across the entire value chain.”
Thompson said the purpose is to compensate farmers in the event of a loss resulting from shared risks, rather than individual risk, associated with weather fluctuations, disease outbreaks or poor yield.
“Traditionally, when risks or a loss event such as a major drought, epidemics or other hazards affects a large population all at the same time or small rural farmers, and often in difficult circumstances, even over a relatively small area or region, assessing the losses of each individual insured party that is affected is not feasible. Traditionally, the insurer will not have the resources to assess each claim individually in a short period even in the best conditions.
“In an Index-Based System, when a claim is triggered for a specific area, all insured units (farmers) within a given geographical area and having similar characteristics, are compensated at the same payout rate, usually a percentage of the sum insured, on events specifically covered by the policy (usually those for which the proxy(ies) meet the specified triggers).
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‘IBAI to extend insurance coverage to over 3m farmers’
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