Agric Insurance Can Generate Over $600m Premium Annually - Insurer

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Mar, Fri, 2024

Agriculture

Agric insurance can generate over $600m premium annually – Insurer

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By Rukayat Adeyemi

The Head of Agric Business, Royal Exchange General Insurance Company, Mr Abdulazeez Ajibola, says, Nigerian agricultural insurance market has the potential to generate a premium of over 600 million dollars annually.

Ajibola said this at the March Annual General Meeting of the Nigerian Council of Registered Insurance Brokers (NCRIB), Lagos Area Committee (LAC), sponsored by Royal Exchange Insurance on Friday in Lagos.

The theme of the event is: “Revisiting Agriculture Insurance In Solving Nigeria’s Current Food Crisis”.

He noted that the highest premium generated by the industry from the agricultural sector was done in 2021 with a cumulative of 15 million dollars.

The insurer expressed disappointment that less than three per cent of agricultural activities in Nigeria were insured.

Ajibola explained that agriculture plays a crucial role in Nigeria’s economy and that according to FAO data 2022, the sector accounts for up to 35 per cent of total employment and 21 per cent of the Gross Domestic Product (GDP).

He further said that Nigeria has a total agriculture area of 90.3 million hectares, of which 74 million are arable land, 6.5 million are used for permanent crops, while 30.3 million are used for meadows and pastures.

“The Nigerian agricultural insurance industry is still nascent.

“Agric insurance only accounts for a small percentage of all insurance premiums sold, indicating a disproportionate underfunding of the agricultural sector,” he said.

According to him, Nigeria is currently facing a severe food crisis, with millions of people experiencing hunger and malnutrition.

Ajibola stated that agriculture plays a crucial role in Nigeria’s economy, but farmers face numerous challenges that threaten their livelihoods and food production.

He listed some of these challenges as low awareness and trust of agricultural insurance products, lack of reliable data, high administrative costs and limited technical capacity.

Others are regulatory and policy constraints, limited market size, basis risk, adverse selection and moral hazard.

These challenges, he said, affect the productivity of the agricultural sector and remained a cause of the current food crisis.

“Nigeria’s agriculture sector faces significant challenges. However, insurance can play a vital role in mitigating risks and promote investment, but addressing the low penetration of agricultural insurance is crucial.

“Insurance can serve as a vital tool in promoting the flow of finance to the mitigating risks and promoting sustainable agricultural practices,” he said.

Ajibola assured that insurance had the potential to play a significant role in protecting farmers from the risks of climate change, pests and diseases, and other natural disasters.

According to him, insurance is a risk management tool that protects individuals or entities from financial losses by transferring the cost of potential future risks to an insurance company in exchange for a premium payment.

He said insurance transfers risk from farmers to insurers, reduces the risk of loan defaults, encourages financial institutions to lend to the agricultural sector and promotes investment and adoption of improved farming practices

The underwriter noted that this would in turn enhance food security through increased agricultural productivity and output, improved supply chain, storage facilities, stabilise food prices and availability.

Ajibola charged all stakeholders in the agricultural sector, which includes; insurers, government, research institutions and farmers associations to collaborate to improve access to agricultural insurance.

According to him, investing in insurance is an investment in food security and economic development.

In his welcome address, Chairman NCRIB-LAC, Mr Ademola Olutusin, said that the event was organised to further build the capacities of brokers and open them up to opportunities in the agric insurance space.

He noted that it was important for brokers and insurers to embrace the opportunities in agricultural insurance, amidst the challenges therein, to improve the agricultural sector and promote food security.

In a remark, Prince Babatunde Oguntade, NCRIB president, said that theme of the event was timely at this period of food insecurity in the country.

Oguntade lauded the leadership of NCRIB-LAC for organising the event and being responsive to the need of its members. (NAN)(www.nannews.ng)

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Edited by Olawunmi Ashafa

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