By Almot Maqolo
The Insurance and Pensions Commission (Ipec) says it is working with the World Bank to develop a framework for weather based index insurance aimed at capacitating Zimbabwe insurance industry and increasing financial inclusion.
“We have just agreed on the terms of reference with the World Bank naturally concerned because we are now in December and it’s a festive season but certainly we hope that by the first quarter of next year we should be able to come up with something, maybe we can start some consultation with the industry,” Ipec commissioner Grace Muradzikwa told Standardbusiness.
The Wolrd Bank has already given the industry regulator an actuarial consultant to work with.
“So we do not necessarily want money,” Muradzikwa said. “We just want capacity building.
“Remember it is the insurance companies, who will offer weather based insurance but we are actually picking on our role of developing the insurance industry and we are saying what can we do to assist and that’s why we engaged the World Bank to come up with this framework.”
Zimbabwe is an agro-based economy and experts say there is need for the southern African country to take the issue of agriculture insurance seriously so as to manage the risk that is associated with the adverse effects of bad weather conditions, which makes it difficult for famers to get back on the field.
The country is still recovering from the shocks of Cyclone Idai and the El-Nino induced drought, which characterised the 2018/19 cropping season resulting in crop failure, livestock and wildlife deaths.
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Muradzikwa anticipates that more companies will come on board offering drought insurance.
“It will also encourage the farmers to go into the agriculture sector,” she said.
“You need more farmers going into the agriculture sector but if there are no risk management measures that they can take in the event of a drought, it discourages investment into agriculture.
“But I think if we can come up with some kind of weather index based insurance you will have more people going into farming and they will take insurance and in the same vein it will increase our financial inclusion because we will now have more people taking up insurance and improve penetration ratios.”
The Transitional Stabilisation Programme is targeting insurance penetration to reach 20%.
In the 2017/18 agricultural season, financial service giant, Old Mutual Zimbabwe Limited expanded its weather index insurance product offering to include cover for excess rainfall as well as other crops that were not initially covered.
Initially the product covered the impact of drought on maize crop but the dry spells in January 2018 triggered pay outs in some location and so over 300 farmers receiving payouts.
