Nairobi — The low level of insurance penetration and high premiums in the agricultural sector are leaving millions of farmers in Kenya and other African countries vulnerable to climate-related shocks. Despite agriculture’s significant contribution to the continent’s economy, accounting for approximately 30% of Sub-Saharan Africa’s GDP, the sector’s insurance coverage remains limited.
According to Phocas Nyandwi, Regional Director at Africa Re, Africa contributes a mere 2% of global agricultural insurance premiums. This is attributed to the low penetration rate, with fewer than 17% of farmers having insurance coverage. Nyandwi noted that the lack of understanding of agricultural insurance and its benefits, as well as the high cost of premiums, are major factors contributing to this low penetration rate.
The consequences of this limited insurance coverage are far-reaching, particularly in light of the increasing frequency of extreme weather events such as droughts and floods, which threaten food security and rural livelihoods across the continent. Isaac Magina, Agriculture and Climate Insurance Lead at Africa Re, emphasized the need for increased investment in strengthening the capacity of underwriters to manage climate-related risks.
Magina highlighted that climate insurance is a relatively new concept, and most underwriters lack the necessary capabilities to leverage the required parameters to insure climate risks. To address this, Africa Re is focusing on building technical capacity within the insurance industry to better understand and underwrite climate-related risks.
Industry experts agree that scaling up agricultural insurance is crucial to protecting farmers against climate shocks and ensuring food security in the region. However, high premiums, limited awareness, and weak policy frameworks continue to hinder progress. In Kenya, for example, the total insurance penetration stands at approximately 2.4% of the country’s GDP, far below the global average of around 7%.
The Insurance Regulatory Authority (IRA) attributes the low insurance penetration in the agricultural sector to skepticism among farmers due to delayed claim settlements and lack of trust in insurers. The IRA reports that agricultural insurance accounts for less than 1% of total insurance premiums in Kenya. To address these challenges, there is a need for increased awareness and education on the benefits of agricultural insurance, as well as efforts to strengthen policy frameworks and build trust between farmers and insurers.