agriculture microinsurance lebanoncss.escwa.org.lb/sdd/3217/p3.pdf · table of contents 1. food...

Agriculture Microinsurance Agriculture Microinsurance Lebanon

Table of Contents1. Food Security

2 A i lt Ch ll 2. Agriculture Challenges

3. Agriculture Microinsurance

4. Microinsurance Potential in Lebanon

Food security has become a key concern worldwide

• Food Availability (quantities)

• Food Access (resources)

• ~ Food Use

I di id l d t li i h• Individuals do not live in hunger

• Resilience to future disruption

Measurement of food security is key to understanding threats threats

• Self sufficiency (production risk)

E t l d d t (t t ti i k) • External dependency rate (transportation risk)

• International Organizations : World Health Organization (WHO) Food and International Organizations : World Health Organization (WHO), Food and

Agriculture Organism (FAO) , United Nations (UN), World Food Program

(WFP) and others

Threats to food security

• Climate change

• Agricultural diseases • Agricultural diseases

• Water crisis / land degradation

• Loss of agricultural land

• Access to credit, technology, education, government services …

• Growing consumer demand

• Export restrictions

• Increase in oil prices

• Population growth• Population growth

• Incentives

Food security requires a close collaboration between the governing and acting bodies governing and acting bodies

• Government

I / i i • Insurance/ reinsurance companies

• Supranational organizations/ unions

• NGOsNGOs

• Local communities

Risk MitigationRisk

ControlRisk

Financing

Non-Exhaustive

Food security in Lebanon

• Less quality – skip meals • Stop bill payments • Sell assets/ livestock • Sell assets/ livestock • Take Loans (shark loans) • Decrease expenditure on

healthcare • Insert children in Labor force •….

* WFP and UNHCR published a study on Syrian Refugees and

Food Insecurity in Lebanon (March 2013)

Table of Contents1. Food Security

2 A i lt Ch ll 2. Agriculture Challenges

3. Agriculture Microinsurance

4. Microinsurance Potential in Lebanon

Brief overview on agriculture in Lebanon

• Permanent cropland is 13.9% of the land

• Employment is about 15% of the active population

• Food prices are significantly increasing (6% as opposed to a worldwide p g y g ( pp

average of 2.7%)

“FAO, Trading Economics

Agriculture industry faces several challenges in Lebanon (MICRO LEVEL)(MICRO LEVEL)

• High cost of leasing land

• Difficult access to water

• Damaged or diseased supplies of seedg pp

• Expensive fertilizers, pesticides and other farming inputs

M k i li d b h df l f bi d• Market is monopolized by a handful of big traders

• Uncompensated losses

Agriculture industry faces several challenges in Lebanon (MESO LEVEL) (MESO LEVEL)

• Access to credit (Banks & MFIs - Vulnerable fluctuating seasonal revenues; No

collateral)

• Lack of investment (warehouses, produce distribution, high impact of bad

season)

• Marketing and access to markets

• No investment incentive

• Disrupted revenues

• Improper agriculture practices (leading to soil erosion, impoverishment…)

To manage risks farmers have developed unsustainable coping mechanismscoping mechanisms

• Self- insurance

• Personal and household savings, non farming income

• Borrowing local money lenders g y

• Reliance on government support & international aid (adverse events or

t l t t h )natural catastrophes)

• Farmers’ support

• Crop diversification

Table of Contents1. Food Security

2 A i lt Ch ll 2. Agriculture Challenges

3. Agriculture Microinsurance

4. Microinsurance Potential in Lebanon

Agricultural Insurance

• Subsistence farming to• Subsistence farming to

sustainable farming

Manage Risks

Stabilize Income

Promote Investment

• Align production incentives

• Raise awareness on risk

mitigation

• Encourage investment

…taking a closer look

• Reduces the negative impacts of a catastrophe

• Expedite recovery: ensures funding to compensate looses and regular cash flow • Expedite recovery: ensures funding to compensate looses and regular cash flow

• Encourage investments: reduces fluctuations in investment returns due to adverse events

• Improve credit availability: acts as a collateral to reduce default rates & improves credit terms

& in turn encourages investment

• Reduce government contingent liability: reduces financing post disaster reconstruction

(more costly than insurance)

• Greater risk awareness: incentivizes adoption of risk mitigation practices

• Stimulate structural reforms to improve insurability of agricultural risks Stimulate structural reforms to improve insurability of agricultural risks

• Provide a safety net for poor households & prevent immigration

“Partnering for Food Security in Emerging Markets” – Swiss Re- 2013

Index based insurance

Weather insurance index parameters’ (such as rainfall or drought) are violated

Definition

Tailored & personalizedTailored & personalizedFast effective and efficient claims settlement processes No adverse selectionNo loss adjustment (Payout is defined as a fixed amount)

E Easy to understand

+

E Easy to understand Easy to administer

Need for accurate and officially recognized and accepted weather stations -

Table of Contents1. Food Security

2 A i lt Ch ll 2. Agriculture Challenges

3. Agriculture Microinsurance

4. Microinsurance Potential in Lebanon

An unfertile agriculture season in Lebanon:

• A farmer needs an average of 3 years to recover the loss of one bad season

• Higher Relief Council intervenes to assess agricultural loss and provide

indemnity especially after a natural catastrophe

• Corruption (?)

• Time (?)Time (?)

• Belonging to political party (?)

Ad H i t ti l i / t i t ti • Ad Hoc international agencies/ government intervention

Some agriculture initiatives were/are underway

• Ministry of Agriculture (MoA) is working on some initiatives however, no public

i f ti i il blinformation is available

• Mutual of farmers (insure farmers against disaster – gov will pay 50% of premium)

Chamber of Commerce Industry and Agriculture in Beyrouth (CCIAB) proposed a law for • Chamber of Commerce Industry and Agriculture in Beyrouth (CCIAB) proposed a law for

agro-insurance but it was blocked

• Lebanon Business Linkages Initiatives (LBLI) farmers interested in agro insurance product Lebanon Business Linkages Initiatives (LBLI) farmers interested in agro insurance product

• Arcenciel and “Wataneh” program –(agro- insurance is key to reduce risk )

• Banks can market agro insurance g

Extracts from: Is Agro-Insurance a Form of Access to Credit?

Farmers are most interested in agro-insurance product

We would love to subscribe to a solidarity or mutual fund

It would be great to complement our d t ith

Credit?

insurance product (LBLI)

mutual fund (Farmer)

products with an agro-insurance; we will have more guarantees and

reduce risks (BLF) Natural factors

cause a loss of $85Mn for apples every other year Why not introduce

Insurance will raise farmers’ attractiveness

t i t

every other year ygroup insurance?

Hydroponics can be a pilot

(USAID) to invest more (Kafalat)

(USAID)

Country Examples

Ethiopia

D h

Bolivia

L f f d • Drought • 13,000 farmers •Project funded by RockefellarFoundation & Swiss Re

• Loss of food crops•Life insurance•Property insurance (tools/ storage)

•Replicated in Tanzania, Rwanda, India and Pakistan

"It wont cover for our losses but it least it

g )

“ I asked for a loan to grow by acquiring more land. For the harvest to pay back, it has to be insured”

It wont cover for our losses, but it least it can cover for the loan I tool for fertilizers”

“Now I have access to loans and farming has become profitable”

“We plant with the bones of our hands and then hope for luck with the weather. Bad season forces us to seek work elsewhere and begin farming again the year after”and begin farming again the year after

Agriculture Microinsurance

• Index Insurance (start simple with one peril and increase gradually such as

amount of rainfall or hail or…)

• Insure capital losses (greenhouses, equipment etc.)

• Farmers personal insurance

Government support to agricultural insurance exceeds 50% of agricultural insurance premium volume of agricultural insurance premium volume

NGOs alone are not able to help and support, government intervention is

essential

CORALIE ZACCAR

Head of Microinsurance DepartmentCommercial Insurance

+9619211680coraliezaccar@commercialinsurance.com.lb