Jun 20, 2010 News
– public, private sector partnerships crucial to manage risks
A key meeting in Antigua, hosted by the World Bank, has concluded that some farmers’ insurance in Guyana and the Caribbean may just not be possible.
Insurance companies may have to modify or customise their policies to fit particular situations, experts say.
These were some of the conclusions put forward by a team of experts from the World Bank’s Agriculture Risk Management Team at the Regional Symposium on Agricultural Insurance – Disaster Risk Management, held at Jolly Beach in Antigua.
The meeting comes on the heels of renewed calls by the Guyana Government for local insurance companies to look at ways to protect the agricultural sector.
The symposium has brought together regional policy makers and technicians, development bankers, private insurance technicians and producers to deliberate on the planning, innovation, development and management of a sustainable agricultural insurance scheme for the Caribbean region.
Targeting the role of the private sector in agricultural insurance in the Caribbean, the team of experts from the World Bank comprising Carlos Enrique Arce, Senior Economist; Vikas Choudhary, Agricultural Specialist; and Pablo Valdivia presented experiences of working models for agricultural insurance and risk assessment as managed by the Bank.
Choudhary covered methodologies in agricultural supply chain assessment, promoting studies that the Bank has carried out in the Caribbean, including cases from Haiti, Grenada and Guyana. Considering that all actors along the chain are vulnerable to the multiple, varied risks that exist, Choudhary added that the region should be concerned about the competitiveness of the commodity, not just the vulnerability, as shocks resulting from risk events may erode the competitiveness of the supply chain and result in sizeable losses to many stakeholders along the chain.
He advised the use of mitigation, transfer and coping or a combination of all three strategies to address risks.
“We have to be able to adequately analyse, prioritise and manage the risks. Effective risk management can lead to sustained competitiveness of the actors along the chain,” Choudhary concluded.
Begging the question if it is possible to design and implement an optimal insurance scheme that can encompass all the desirable characteristics, Arce presented lessons learned from the World Bank’s experiences in attempting to find solutions to weather risks using the Weather Index Insurance (WII).
Arce gave an overview and genesis of WII – a concept borrowed from energy sector of the USA and adapted to agriculture.
He noted that the process is very complex to apply and is still a work in progress.
“This type of insurance can be applied at the meso and macro levels and huge technical and financial support is required for its implementation,” he said.
In addressing the applicability of Index-based Insurance for the Caribbean, Arce advised that it is suitable for drought, yet more challenging for sudden risk events such as hurricanes, which are frequent within the region.
In the particular case of the Caribbean there may also be challenges involved in dealing with such a large number of independent farmers, a large variety of crops and many short cycle crops which are complex to model.
Rounding off the presentations from the Bank on the private sector perspectives on agricultural insurance, Valdivia shared an in-depth look at the case of agricultural insurance for crop and livestock farmers in St. Elizabeth and Portland parishes in Jamaica.
Multiple risks and exposure to varied weather patterns impact crop production. Additionally, susceptibility to weather risks and to pest and diseases vary between crops and even within the same crop.
Valdivia concluded that in addition to small farmers’ risks being very challenging, agricultural insurance does not fit all and there are some risks that are not insurable.
Essentially, a combination of mitigation, transfer and coping is needed to deal with agriculture risk management in the Caribbean, the official said.
Given its particular situation of independent small farmers and possible complex modelling of insurance products, public-private partnerships are required to develop and implement a suitable insurance programme.
The Bank stressed that governments need to strengthen their institutions and co-operate with the private sector to cope with risks that affect agriculture production.
AUBREY NORTON FRIGHTEN RENEGOTIATION AND RING-FENCING
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