Affordable insurance against the risk of drought will be implemented for small-scale crop and livestock farmers over the next two years.
Land Bank’s insurance company, LBIC, will launch the index insurance in collaboration with a Swiss company, CelsiusPro, which specialises in climate risk solutions.
LBIC says it has been proven that index products are cost-effective as well as administratively efficient in insuring small-scale farmers and semi-commercial farmers.
Claims are paid out when a pre-agreed objective index, such as rainfall or soil moisture levels measured over a period, exceeds the threshold. Index insurance does not require the services of assessors for claims, making settlements quick and transparent.
LBIC is beginning with awareness and training in the livestock industries in the last quarter of the year. Managing director Pascal Sihugu says the pilot project will start in the Eastern Cape, Limpopo, North West, KwaZulu-Natal and Mpumalanga, home to about three-quarters of the country’s small-scale farmers.
“Drought is the biggest risk affecting vulnerable farming communities in South Africa, as an arid region. The country is also vulnerable to climate change and El Niño, which can exacerbate droughts,” says Sihugu.
“An insurance product of this nature is extremely important for the sustainability of agriculture in South Africa with its approximately 250 000 small-scale farmers and a further 1,5 million subsistence farmers who mostly have no insurance because there are no targeted insurance solutions for this market segment.”
CelsiusPro, which assisted with product development, helps private and public institutions worldwide understand climate risks and counteract their adverse financial impact.
A donation for the project was provided by Global Parametrics, a British enterprise that supports the search for solutions and resistance against natural disasters and climate change.
Mark Rueegg, CEO of CelsiusPro, said the company is delighted about their index insurance partnership with LBIC, which will support resistance to climate change and greater food security. “We look forward to utilising our technology in support of LBIC to bring new insurance products to the South African agricultural market,” he says.
