The National Insurance Commission (NAICOM) has granted product approval to five insurance companies participating in the Index-Based Agricultural Insurance (IBAI) pilot scheme.
The Director, Inspectorate, NAICOM Barineka Thompson, who disclosed this last week at a seminar organised by the commission for Insurance journalists, noted that the approvals are in line with the ongoing efforts by the present administration to diversify the Nigerian economy and create opportunities to promote Agric. business and employment, stressing that IBAI is a program in support of the policy of government.
According to him, IBAI is a relatively new financial instrument for transferring agriculture risks from individuals or groups of farmers to risk carriers (Insurers), adding that 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.
He said IBAI pays out benefits on the basis of a predetermined index (e.g. rainfall level, crop yield) for loss of assets and investments, primarily working capital, resulting from weather and catastrophic events, without requiring the traditional insurance services and that 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.
Thompson, said NAICOM is collaborating with the Nigeria Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL) on the initiative, stressing that 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.
He said the pilot scheme is running in 10 states which include: Adamawa; Bauchi; Benue; Kaduna; Kano; Kasina; Kebbi; Nasarawa; Taraba and Zafara, whilst the crops are, rice; maize; soya and sorghum. “The 2017 planting season has gone with five insurance companies participating in the consortium mainly under the NIRSAL facility, we anticipate that more companies will join in the 2018 planting season as a result of greater awareness and the upcoming capacity building program,” he said.