PRESENTATION ON NYALA INSURANCE

EXPERIENCE ON EPIICA/WEATHER INDEX INSURANCE

BY: SOLOMON ZEGEYEUnderwriting Manager

DECEMBER 3, 2015

Capitol Hotel, ADDIS ABABA

ETHIOPIA

Contents of Presentation

1. General Introduction2. Project feature and pilot objective3. Pilot Areas4. Project partners5. Performance of Nyala –Premium Production and payout6. Challenges7. The Way Forward

1. General Introduction

Agricultural crop production and livestock rearing are the key sources of income for most rural households in Ethiopia

Enhancing the production and productivity of these activities is crucial to achieve food security and reduce rural poverty

Nearly 55% of small holder food producers operate on one hectare or less.

Yield intensification is the most viable way as land is scarce.

Access to finance limits the adoption of improved agricultural technologies required for yield intensification

The presence of correlated weather shocks and absence of collateral obstacle commercial lenders to avail credit to rural households

2. Project feature and Pilot Objective Ethiopian Project on Interlinking Insurance for

Credit in Agriculture(EPIICA)

EPIICA is an innovative project aimed to avail insurance and credit for farmers trapped in low investment-equilibrium

It is an innovative approach which brings for the first time a private commercial bank in rural financing using insurance policy as partial collateral

To generate an experimental control group evidence and thereby measure the impact of the project on:

1. Farm productivity and household welfare 2. Commercial viability of micro insurance and micro

credit

3. Pilot Areas

Region Zone Woredas

KebelesStandalone

Interlinked

Controlled

Amhara North Shewa

4 17 17 28

Amhara West Gojjam 1Amhara South Wollo 1

4. Project Partners

Nyala Insurance Dashen Bank I4 Research team(University of California, FAO and JRC-

EU) University of Athens and Ethiopian Economic Association Bureau of Agriculture Amhara Region National Meteorology of Ethiopia Unions and Primary cooperatives

5. Performance of Nyala on EPIICA/ I4 –Premium ProductionYear Region No

farmersCrop Type

Hectare Sum Insured

Premium

2012 Amhara 200 Teff, Maize

59.18340,283 45,529

2013 Amhara 5,483 Teff, Maize

241.02 4,981,229832,698

2014 Amhara 254 Teff 83.00 473,615 33,787

2015 Amhara 718 Teff 248.5 1,429,533.1 102,241.94

Total 6,655 631.7 7,224,660.1 1,014,255.94

5. Performance- Claims Settled Under EPIICA Project

Year 2012Woreda Crops grown No of

KebeleNo of Farmers

Claim Paid (ETB)

Tewledere Teff 4 30 6,607.33

Qewot Teff,sorghum,wheat

3 28 17,578.84

Efratana Gidem Teff and sorghum 2 19 3,048.95

Antsokiana Gemza

Teff, Sorghum 2 14 5,469.55

Adet Teff 2 20 5,838.83

Total 13 111 38,543.50

5. Claims Settled Under EPIICA Project…… Year 2013

Tewledere woreda represented by Worebabo station registered frequent payout and it was also severe as compared to other districts

Woreda Crops grown

No of Kebele No of Farmers

Claim Paid

Tewledere Teff 9 1,638 181,534.82

6. Challenges1. Despite the existence of apparent demand for the

interlinked product, its uptake was constrained by failure to release credit

2. Competitors better response: both micro credit and private commercial banks availed credit timely with better offer.

3. Delivery Channel: Unions and cooperatives lack basic financial and record management skill.

4. Regulatory Problem: Absence of legal framework defining unions and cooperatives to serve as agent of micro insurance. Due to this we were unable to pay remuneration as commission for their intermediary role.

5. High Premium rate: for some of the villages the premium rate went as high as 39% and this limits uptake at early years

6. Reinsurance: Swiss Re failed to provide support due to scale problem(small premium)

6. Challenges…7. Absence of Prime Mover: In most WII pilot projects,

donors/development partners who operate locally are behind the projects. For example OA and WFP for R4, MOFE/UNDP for PAA project.

7. Way Forward1. Building capacity Capacity of delivery channels in terms of

management and insurance knowledge Technical skill of staffs of insurance company in

design of products Regulatory and supervisory capacity of

regulator Data infrastructure to obtain weather and

agricultural information2. Regulatory Issues Regulation on Micro insurance agency Regulation on realization of national reinsurer

7. Way Forward3. Collaboration and Commitment Effective collaboration required among

partners for better performance in micro insurance

Micro insurance requires a bit further commitment as much of the work is done at grass root level among rural communities

Other private insurers also need to take part in weather index insurance

Thank You for Your Attention