Value for farmers from meso level index insurance!? Presentation for the 7th Annual International Microinsurance Conference, Rio de Janeiro, 9 November 2011 Micro Insurance Network Agriculture Insurance working group K lij M i k Karlijn Morsink Roland Steinmann Mangesh Patankar Thérèse Sandmark Gaby Ramm
Preliminary definition Meso level Index Insurance (MLII): MLII provides a portfolio or group cover to an aggregator, such as a Financial Service Provider, Farmers association, input supplier, local government or NGO, based on an index. In turn the aggregator retails til its benefits to farmers through h a variety it of services (Hazell et al. 2010)
Macro Meso Micro Government Aggregators Farmers Cover for national calamities Cover for budgetary issues due to regional calamities Cover for income loss due to farm level hazards
Questions to be adressed: How are current meso level index insurance schemes organized? Do they offer value to farmers and if so what value do they deliver and how has this value been delivered?
Value for farmers from meso level index insurance!? Whyattention for MLIInow? Realization that micro index insurance has its challenges Recent emergence of (a trend) a variety of meso level solutions Questions about potential for value to farmers
Potential solutions of MLII to micro index insurance problems Lower admin costs? Lower basis risk? Less complicated to build trust and to educate?
Potential valuefor farmers from MLII? Direct benefits: Value for the farmer that is derived directly from having access to an agricultural linsurance product: Ex ante and ex post effects. I di b fi Oh h i d fi Indirect benefits: Other, such as increased access to finance, innovations or competition (often as a consequence of lower operating costs of the aggregator)
Nine MLII programs we were able to identify Ghana: GIZ and Ghana Insurers Association Philippines: Microinsurance Innovations Program for Social Security (MIPSS) Burkina Faso: Planet Guarantee and Allianz Africa Mali: Planet Guarantee and Allianz Africa Mexico: Agrosaemex (discontinued) Haiti: Microinsurance Catastrophe Risk Organization (MiCRO) India: BASIX (Discontinued. Perhaps the oldest meso scheme) India: DHAN foundation, People Mutuals and Agriculture Insurance Company of India India: Pioneer Seeds and ICICI Lombard (discontinued) OTHERS: Vietnam, Bangladesh (never took off, product design)
You being a specialized audience, are you aware of other meso level index insurance intiatives?
Until now identified categories include Insurance combined with farmer input product Insurance of aggregators portfolio Insurance of farmer output (crops) f.e. Pioneer seeds and f.e. GIZ and Weather Risk Ghana Management Insurers Services, Association India f.e. DHAN foundation, People Mutuals and Agriculture Insurance Company of India
Period Index Claim Aggregator / Type history Delivery? Ghana IIPAC 2011 Weather none Bank s loan portfolio Philippines MIPSS 2011 Area yield none Farmer association Burkina Faso 2011 Satellite none Farmer association Mali 2011 Satellite and Area yield none Haiti MICRO 2011 Weather yes MFI Farmer association India Pioneer 2008 Weather none Seed company Seeds India Basix Weather MFI India DHAN 2009 Weather yes Farmer association
Program history and context 5 started only this year, 1 in 2008 No sustained premium subsidies envisaged Several discontinued 2 have already claim li payouts and increasing i uptake tk Three reasons for venturing into MLII: 1. Entering markets with low levels l of agriculture insurance penetration ti 2. Lowering existing insurance premiums by diversifying risk. 3. Protecting loan portfolio
Observed kinds of direct value for farmers During Calamity: Cash payouts/reduced t/ dburden on input costs Outstanding loan balances cancelled In General: Secured access to banking
Indications of indirect value for farmers Expanded agricultural loans New loans after default Emergency loans Increased competition among aggregators. g Increased access to insurance and other products.
Main conclusions: Up to now a variety of three distinct types of MLII identified for different purposes, fitting to the characteristics of the insurance market Innovative ways of offering direct and indirect value through variety of channels
Discussion: Is only indirect added value (protecting of aggregator) enough? Is spreading of basis risk over a larger pool a sustainable insurance solution? Is the observed shift from micro to meso leading to reduced need for subsidies for insuring agriculture risk?
WE ARE THANKFUL TO: Maria Victoria Saenz Samper, Samper, IADB Richard Leftley, Microensure P Gunaranjan, (Ex employee BASIX), UC Weather Risk Management Services India Venkatram Vasantavada, Pioneer Seeds Harini Kannan, Swiss Re Centre for Insurance andrisk Management Mr. Balasubramanian, People Mutuals Mr. Vasimalai, DHAN foundation GIZ, Ghana Ghana Insurers Association Pranav Prashad, ILO MIF Anne Hastings, Fonkoze Dr. Antonis Malagardis, GIZ Philippines Mathieu Dubreuil, Planet Guarantee -