Ghana has been unable to upscale the newly set-up Agricultural Insurance Fund even though the pool started well, according to Mr Kofi Andoh, the acting Commissioner of Insurance.
The reasons for this state of affairs include the lack of capital, unaffordable premiums, and poor institutional collaboration, reported the business news website, BFTOnline, quoting Mr Andoh.
In Ghana, and across Africa, the high risks involved in providing insurance cover for the agricultural sector require inordinately high premium rates if they are to be viable for underwriters but this inhibits farmers, many of whom cannot afford the premiums.
Action taken
Nevertheless, the National Insurance Commission (NIC) is acting to improve the Fund. Mr Andoh said, “We are working with some development partners to develop the governance and operational framework for the Fund to facilitate its effective implementation.”
The Fund is also being restructured as a Technical Service Provider. “This will enable insurance companies which are willing to develop and distribute agricultural insurance,” he added.
He was speaking at a workshop on “Agriculture and Climate Insurance” in Accra, organised by African Reinsurance Corporation on 10-12 July 2024.
Mr Andoh told workshop participants, “The traditional challenges of the agricultural sector such as pests and diseases, high mortality of livestock, post-harvest losses, and very low productivity due to low quality of inputs and inefficient methods of production, have been compounded by climate change and loss of biodiversity.”
He added, “Though it is not the only panacea, agricultural insurance is a major tool that could be used to help mitigate the risks that plague agricultural productivity.”
Outlining the efforts made to protect agriculture, he said, “In Ghana, we embarked on a journey to implement agricultural insurance in 2010. After the feasibility studies and stakeholder consultations, the Ghana Agricultural Insurance Fund was set up.”
The Insurance Act 2021, the current legislation, establishes the NIC and tasks the regulator to set up the Agricultural Insurance Fund to provide insurance to farmers. The NIC signed a Memorandum of Understanding in November 2023 to develop and operationalise the Fund. The functions of the pool are to subsidise premiums, build the capacity of service providers, and boost the deployment of technology in agricultural insurance.
The 2021 insurance law also provides a legal definition of indexed insurance. This resolves the legal uncertainties surrounding indexed insurance as an acceptable insurance mechanism.
The NIC is working on a directive on indexed insurance to help ease the development and delivery of affordable agricultural insurance to smallholders.
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