Nelson Gahadza
THE Insurance and Pensions Commission (IPEC) has implored the Government to consider subsidising insurance premiums for smallholder farmers to enhance climate change risk resilience and cushioning.
Zimbabwe’s smallholder farmers heavily rely on rains for their farming activities, exposing them to the vagaries of climate change, which, in most cases, decimate crops and livestock.
During the 2023/2024 agricultural season, most parts of Southern Africa, including Zimbabwe, experienced a severe El Niño-induced drought, which resulted in extensive summer crop failures.
Stakeholders believe agriculture insurance could have played a key role in cushioning the farmers from the impact of the drought. However, penetration within the sector remains low.
IPEC director (pensions and life insurance supervision) Mr Cuthbert Munjoma said the insurance and pensions industry plays a key role in climate risk mitigation across various economic sectors; hence, the Government should consider subsidising farmers on premiums to increase the uptake of cover as a climate change risk mitigation measure.
“IPEC has recommended that the Government consider subsidising insurance premiums for smallholder farmers,” he said in a presentation at the recently ended 2024 edition of the Zimbabwe Economic Development Conference.
Insurance for this segment, Mr Munjoma added, is critical given that 70 percent of the country’s food requirements comes from smallholder farmers.
As a largely agriculture-based nation, Zimbabwe heavily depends on its agriculture sector for food production, employment creation and export earnings.
However, insurance penetration
within the sector is estimated at below 2 percent.
In his presentation that focused on the role of insurance regulation in enhancing climate risk resilience, Mr Munjoma said agriculture insurance commands 3 percent of the general insurance business in the country.
He said low agriculture insurance coverage calls for policy and regulatory intervention to address the issue and that there is need to cooperate with financial regulatory authorities on frameworks for climate financing strategies.
During the 2023/2024 agricultural season, Mr Munjoma said, the premium was US$5 million and claims amounting to US$32 million were processed.
As part of efforts to upscale agriculture insurance penetration, IPEC developed a policy advisory paper on agriculture index insurance, which has since been approved by the parent ministry.
“Awareness among farmers, agricultural extension officers and farmer organisations on agriculture index insurance is ongoing.
“The project is set to enhance the resilience of smallholder farmers against climate-related risks for improved livelihoods and food security,” said Mr Munjoma.
Other initiatives include the Pfumvudza/Intwasa area yield insurance, where 30 000 farmers in Rushinga and Mwenezi participated in the pilot project involving a consortium of insurers and the Government in 2022.
Mr Munjoma said 8 600 farmers received a combined claims payment of US$124 000.
He said insured perils include drought, locusts, floods, hurricanes, the fall army worm, other pests and diseases.
In a recent interview, Zimbabwe Farmers Union secretary-general Mr Paul Zachariya said insurance plays an important role in agriculture, but there have been minimum insurance products for smallholder farmers.
“There is what we call area yield insurance, which is area-based, and we then say you are insuring your yield, so for whatever reason, including lack of moisture at some point, stress and so on, if you had that insurance, you would still be guaranteed the value of that produce.
“So, farmers would still get the value of the produce that they would have lost.
“Therefore, particularly in a year like this one, considering issues like climate change and other related disasters that would include flash floods and hailstorms, you are assured that if you had insured your crop, you would be indemnified to that extent,” he said.
He noted that, in terms of uptake, there was also need for insurers to tailor the product to suit the level and category of farmers, including smallholder farmers.
According to Mr Munjoma, in terms of other insurance and pensions industry climate financing, there are several solar and mini-hydro power plants financed by insurance companies and pension funds that are already feeding into the national grid.
He said US$57,3 million has been invested in six renewable energy projects since 2018, and the Zimbabwe Electricity Transmission and Distribution Company is the main off taker of electricity generated by independent power producers.
Mr Munjoma said the industry injected over US$50,2 million into 22 infrastructure projects over the last five years. The projects include the development of green buildings such as malls.