National Insurance Commission (NAICOM) has disclosed plans to approve 15 more companies for the Index-Base Agriculture Insurance (IBAI) initiative.
Recall that five companies: Nigerian Agricultural Insurance Corporation (NAIC), Royal Exchange Assurance; Leadway Assurance; Industrial & General Insurance (IGI); and AXA Mansard Insurance had gotten approval for the initiative.
Commissioner for Insurance, Alhaji Mohammed Kari disclosed at the IBAI workshop held in Abuja that the Commission is looking forward to approving the initiative for a total of 20 insurance companies by next year.
The IBAI is a relatively new financial instrument for transferring agriculture risks from individuals or groups of farmers to (international) risk carriers (insurers). It is an ongoing effort by the present administration to diversify the Nigerian economy and create opportunities to promote Agric. business and employment.
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).
According to the insurance commissioner, the ongoing synergy among the Commission, the Nigeria Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL), African Reinsurance Corporation and the International Finance Corporation, IFC will immensely benefit the nation’s insurance industry.
“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”, Kari said.