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Global Index Insurance Facility
in Africa
GIIF is funded by:
OFFICIAL USE ONLY
1
Index insurance
pays out benefits on the
basis of transparent
parameters (e.g. rainfall
level) without the
traditional services of
insurance claims
assessors,
allowing for faster and
more objective claims
settlement.
What is index insurance?
Covers crops against extreme
WEATHER
and catastrophes
Uses multiple sources of
DATA
Highly
ADAPTABLE
to local conditions
2
CONFIDENTIAL
Climate change and agriculture in
Mozambique
Why is IFC
involved?
• Agriculture accounts for 32%of GDP and provides a livelihood to
almost 81% of the labor force.
• The majority of production is by smallholder families, many of whom
combine food crops with a single cash crop such as cotton.
• The majority of Mozambican agriculture is rain fed and therefore very
sensitive to climatic conditions.
• Climate change models
indicate an increased
likelihood of extreme
weather events such as
flood, drought, and
cyclones leading to
severe negative impacts
on the agricultural sector
in Mozambique.
Impact on
agribusinesses
Impact of
climate change
Agriculture in
Mozambique
3
CONFIDENTIAL
Food insecure population
The index insurance value chain• Intermediary/broker designs
product to cover company’s
portfolio, with input from
agribusiness management
and staff
• Agribusiness purchases
portfolio insurance from local
insurer on behalf of farmers
• Insurer transfers part of the
risk to international
reinsurance companies,
insuring an influx of foreign
capital in case of major
catastrophe
• In case of weather event,
insurance company transfers
payout to agribusiness
• Agribusiness can use payout
to provide loan balance
credits, replacement inputs,
or value add services
Farmers
Farmers
Farmers
Insurance
Company
Payout in case of
weather event
Reinsurance
Company
Intermediary
/Broker
Agribusiness
Premium payment Inputs/loan
*loan
balance
credit or
add in
case of
payout
Product design
Risk transfer
Payout in case of
weather event
4
CONFIDENTIAL
Insured $333k in
inputs
$55k paid in
premiums
Received payout of
$153k
IFC
OLAM
OLAM Mozambique
IFC ENGAGEMENT
OLAM Mozambique
• Operates contract farming and
food processing schemes for
seven value chains.
• Assists contract farmers with
inputs, financing and extension
services
IFC ADVISORY SERVICES
• IFC client Guy Carpenter
designed product to protect
cotton crops against excess
rain, drought and cold
temperatures
COVERAGE
• Insured $333,000 in inputs for
cotton farmers in the Monapo
district in 2013.
OUTCOMES
• Received a payout of $153k
due to drought during the
flowering period.
• Mozambique Cotton Institute
used the payout to pay the
premium for following year
Guy
CarpenterAdvisory
Product
design
5
CONFIDENTIAL

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Access to Finance Africa - Micro Retail

  • 1. Global Index Insurance Facility in Africa GIIF is funded by: OFFICIAL USE ONLY 1
  • 2. Index insurance pays out benefits on the basis of transparent parameters (e.g. rainfall level) without the traditional services of insurance claims assessors, allowing for faster and more objective claims settlement. What is index insurance? Covers crops against extreme WEATHER and catastrophes Uses multiple sources of DATA Highly ADAPTABLE to local conditions 2 CONFIDENTIAL
  • 3. Climate change and agriculture in Mozambique Why is IFC involved? • Agriculture accounts for 32%of GDP and provides a livelihood to almost 81% of the labor force. • The majority of production is by smallholder families, many of whom combine food crops with a single cash crop such as cotton. • The majority of Mozambican agriculture is rain fed and therefore very sensitive to climatic conditions. • Climate change models indicate an increased likelihood of extreme weather events such as flood, drought, and cyclones leading to severe negative impacts on the agricultural sector in Mozambique. Impact on agribusinesses Impact of climate change Agriculture in Mozambique 3 CONFIDENTIAL Food insecure population
  • 4. The index insurance value chain• Intermediary/broker designs product to cover company’s portfolio, with input from agribusiness management and staff • Agribusiness purchases portfolio insurance from local insurer on behalf of farmers • Insurer transfers part of the risk to international reinsurance companies, insuring an influx of foreign capital in case of major catastrophe • In case of weather event, insurance company transfers payout to agribusiness • Agribusiness can use payout to provide loan balance credits, replacement inputs, or value add services Farmers Farmers Farmers Insurance Company Payout in case of weather event Reinsurance Company Intermediary /Broker Agribusiness Premium payment Inputs/loan *loan balance credit or add in case of payout Product design Risk transfer Payout in case of weather event 4 CONFIDENTIAL
  • 5. Insured $333k in inputs $55k paid in premiums Received payout of $153k IFC OLAM OLAM Mozambique IFC ENGAGEMENT OLAM Mozambique • Operates contract farming and food processing schemes for seven value chains. • Assists contract farmers with inputs, financing and extension services IFC ADVISORY SERVICES • IFC client Guy Carpenter designed product to protect cotton crops against excess rain, drought and cold temperatures COVERAGE • Insured $333,000 in inputs for cotton farmers in the Monapo district in 2013. OUTCOMES • Received a payout of $153k due to drought during the flowering period. • Mozambique Cotton Institute used the payout to pay the premium for following year Guy CarpenterAdvisory Product design 5 CONFIDENTIAL