State of the Sector: Agri-Insurance for Smallholder Farmers A global stocktake of an evolving industry
Economic losses due to extreme weather, climate and water events have increased sevenfold from the 1970s to the 2010s.Scientists predict that these events, driven by climate change, will only become more common in the years to come— driving significant losses across many sectors of the economy. With economic damages from extreme weather estimated
at more than USD 2 trillion over the last decade, risk management tools are more necessary than ever.
Low- and middle-income countries are more vulnerable to the impacts of climate change, particularly since a large proportion of their populations depend on climate-vulnerable sectors—such as agriculture and fisheries—for their livelihoods. Agricultural insurance can be a powerful tool to reduce that vulnerability and help smallholder households adapt to climate change. Recent evidence suggests that even a 1% increase in insurance penetration reduces the disaster recovery burden on developing countries by 22%.
However, the challenges of developing and delivering agri-insurance to smallholder farmers remain significant. Farmer understanding of insurance is typically low, products can be complex and costly to deliver, and regulatory frameworks to facilitate the insurance market are often lacking. Multi-sector collaboration, including an active government role, is needed to close the persistent insurance protection gap in these countries.
The findings of this report were shared and debated in a virtual industry convening of over 130 stakeholders in January 2022. Key ideas and reactions from these discussions have been captured in this report, which sets out to:
- Take stock of the current state of agri-insurance for smallholder households, distilling what has changed in the sector since 2018;
- Introduce new ways of thinking about the sector in the form of four deep dives; and
- Propose a set of priority areas to guide work over the next 5 years.