By A Correspondent| African Risk Capacity Limited (ARC Ltd) says Zimbabwe has great potential to grow the agriculture insurance market.

ARC Ltd is a financial affiliate of the African Risk Capacity Group and provides parametric insurance services to African Union member states and farmer organisations, employing financing mechanisms to pool disaster-related risk across Africa and transferring it to international risk markets.

“Zimbabwe is one of the most exciting markets for agriculture insurance. Firstly because Zimbabwe has a sophisticated insurance market that has existed for a considerably long period of time. Secondly agriculture is a very important component to the economy of Zimbabwe but also to the broader economic aspirations of Zimbabweans at large,” ARC Ltd chief executive Lesley Ndlovu told the media in Harare this week.

ARC Ltd says the country’s well developed agriculture terrain makes it easy for the company to grow its business here.

“If you look historically there have been programs around tobacco insurance (for hail), winter frost for wheat. So we are coming to expand the service offering in a market where the basics and infrastructure already exists.

“There is high levels of sophistication within the local insurance markets and we are plugging into that and providing the financial backing for local insurance markets to significantly scale up what they do, also working with technology which is improved significantly in terms of being able to analyse and process data and also in terms of being able to engage with the end clients,” Ndlovu said.

“We want to protect the investments that are going into agriculture and we believe that insurance is one of the instruments that is absolutely essential in the sector because it allows people to bounce back and it also facilitates access to credit.

“Our approach in Zimbabwe is to work with locally based partners and we know that they know the market and we can provide to them our expertise in underwriting, our expertise in data analysis as well as our expertise in the financial sector in general so that we are a good complement to the efforts that are being made,” Ndlovu said.

“ARC provides ‘macro’ insurance to governments, which is coverage at the national level. The insurance coverage taken by the government is usually supplemented by a replica policy taken out by humanitarian agencies operating in the country such as the World Food Program. However, this coverage is seldom adequate to cover the entire population that needs insurance.

“As part of the national disaster risk management and financing strategy, we suggest governments must share the financial burden of residual risk with their local insurance companies who are well positioned to manage it. This is done through the development of market-based solutions of micro and meso insurance”.

Currently, the majority of Zimbabwean farmers are uninsured, posing a serious threat to the sector in the face of prevalent insurable risks.

ARC Ltd is headquartered in Johannesburg, South Africa and is the largest player in providing insurance against extreme weather in Africa. The company has paid out claims of up to US$130 million since its inception in 2014.   

“We provide insurance against droughts, floods and tropical cyclones working with governments with humanitarian agencies and also with small to medium scale farmers all across Africa. At the moment we operate across 35 countries up and down the continent.

“The money (US$130 million) has gone towards the launching of relief efforts after severe weather events. The Zimbabwean government is one of our clients and partners within the African Risk Capacity and we paid a claim of US$2,4 million after the 2019 drought. Since then we have been very active in southern Africa,” Ndlovu said.

“We paid US$10,7 million in Madagascar after a tropical cyclone and we paid within four business days thereby allowing the government of Madagascar to launch very quickly relief efforts. In the last few weeks we paid a claim to the government of Zambia of US$5,3 million. Additionally, we have paid a claim of US$14,2 million to the government of Malawi again following the drought that they have experienced,” he added.