Public Private partnerships in Agriculture The contribution of Kilimo Salama small scale weather index agriculture insurance in Kenya

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1 Public Private partnerships in Agriculture The contribution of Kilimo Salama small scale weather index agriculture insurance in Kenya

2 Weather index insurance for small scale farmers safe farming

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4 What is weather index based insurance? Weather station measures conditions No farm visits = low admin costs Relation rainfall & crop growth using agronomic models Covers defined shared weather risks (drought, excess rain, frost, weather related disease) If weather station shows loss, then all insured farmers are paid, irrespective of on-farm loss Farmers encouraged to take care of their farm Quick disbursement of payouts Example Agronomic model

5 Implementing Index Insurance Kilimo Salama Kilimo Salama (Safe Farming) initiated in Kenya in Dec 2008 Micro insurance product insuring farm inputs (seeds, fertilizer, chemicals) against drought or excess rain Joint project between UAP Insurance and Syngenta Foundation for Sustainable Agriculture Other partners to the project are: Fertilizer distributor MEA Ltd Pesticide distributor Syngenta EA Ltd Mobile phone provider Safaricom

6 Why do farmers need insurance The case of Jane Gathoni Simon Jane planted 4kg of hybrid maize seed in March 2009 worth 20 USD on 1/2 acre in Laikipia, Central Kenya in 2009 In we experienced the worst drought that had been seen for 20 years Normally Jane would have planted Government Relief seeds following such a drought. Since she was insured she bought maize seed AGAIN worth 18 USD in October 2009 And harvested 2 bags of maize (80 USD) the following January With the comfort of insurance, she has now planted 1 ½ acres of certified maize seed and is starting to use fertilizers.

7 How does Kilimo Salama work? 1. A farmer can buy insurance at a 5% premium at an input shop when purchasing farming inputs. 2. The insurance covers adverse weather whose trigger is monitored through automated weather stations 3. Registration is done on mobile camera phones by the input dealers 4. Payouts are made based on index triggers based on weather data recorded at the weather stations, there are NO farm visits 5. Payouts are transferred through the mobile phne payment system M-Pesa 6. Farmers questions answered through a toll free helpline 7

8 How does Kilimo Salama work? (continued)

9 9 How does Kilimo Salama work? (continued)

10 Claims Settlement Process

11 Summary of how Kilimo Salama works Mobile Phone Platform Contract Administration: Administering and monitoring policies Monitoring stockist performance Managing cash flows with stockists Monitoring training activities and performance Communication function: Communication with farmers Providing additional crop advisory services to farmers during season 11

12 Marketing & Communication Communication Channels Field days Farmer group trainings Radio show Telephone helpline Focus group discussions

13 UAP Credit Services Flexible payment options

14 Success Highlights: What has Kilimo Salama Achieved Insured 200 farmers in first pilot in farmers in ,000 farmers in 2011 And targeting 45,000 in 2012 Modest premiums on first pilot Premiums of over Kes 30 million (R 300,000) in 2011 Expanded from one district in Eastern Kenya in 2009 to 6 more districts in Kenya s bread baskets Covering more than 40% of Kenya s agricultural hinterland From one weather station in 2009 to over 30 today

15 Success Highlights Product Information and Training: No one believes insurance until they or their relatives receive pay-outs The first pilot during the 2009 season recorded the worst drought in last 20 years In this region, insurance registrations increased threefold in the subsequent 2010 season

16 The Products Mix: Striking a balance between Indemnity based and Weather Index Products- Not all weather risks can be transferred through index based solutions e.g. Fire and Hail. Insurance Infrastructure: Insufficient weather data, number of automatic weather stations, Quality historical weather data. Basis risk: Defined as; when a famers suffers loss and the index does not show that there is a payout. Marketing and Distribution: Key Challenges Due to many farmers involved scaling up is only viable if registration and payouts are paperless. Distribution through Agro-vet shops; Insurance is not their core product - Insurance registration process must be fast and convenient Regulatory approvals for alternative distribution channels.

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18 Opportunities for Public - Private Partnership Weather data and infrastructure Weather infrastructure in partly controlled by country government and multilateral agencies (World Met Organisation) Public investment required Government of Kenya May be supported by private sector/multilateral agencies/development partners Sygenta and IFC in case of Kilimo Salama Credibility of weather data requires certification (by the Met office) to eliminate conflict between insurer and insured Kenya Met Department (KMD) certifies Kilimo Salama weather Better working relations needed

19 Opportunities for Public - Private Partnership Agricultural productivity data and statistics To help develop weather index To develop area yield index which is an alternative to weather index Only the government has this data its accuracy is important Legal framework Insurance and agricultural legislation have a big role to play Financial incentives/subsidies Subsidies may be given through insurance ensures farmers do their work rather than wait for subsidies Helps establish insurance schemes which can subsequently survive post subsidy regimes

20 About UAP

21 ABOUT UAP Over 80 years in the Kenyan market Regional presence Business Lines UAP Holdings: 5 subsidiaries Kenya 10 branches, 10 satellites Life UAP Insurance - Kenya UG Kampala and 4 major towns General UAP Life - Kenya South Sudan Medical insurance UAP Insurance Uganda Plans to enter other countries in region TZ, RW and DRC Financial services UAP Insurance South Sudan UAP Financial Services - Uganda

22 FINANCIAL STRENGTH Credit Rating AA (Highest in East Africa) 1 st ISO certified (Recertified 3 times now to the latest standard) FiRe award winner for 9 consecutive years Green Technology (Investments in EDMS and ERP) Uganda Overall Insurer of the Year 2008 & 2009

23 UAP Strength Gross Written Premium in 2010 Over Kes 6B premiums (among top 3 in East Africa) UAP Uganda 1.24 Gross Written Premium in Billions UAP Sudan 0.40 General Business Kes 3.9B (among top 3 in Kenya) UAP Kenya 4.18

24 UAP Strength Assets in Billions Total assets over Kes 12B Asset Base Total Assets Net Assets Net Assets Kes 4.7B (among top 2 in East Africa) UAP Kenya UAP Uganda UAP Sudan

25 Thank You

26 UAP, Bishops Garden Towers, Bishops Road, PO Box , Nairobi, Kenya. Tel , Fax ,