Field visit and training in Tamil – Nadul (India)
Transcription
Field visit and training in Tamil – Nadul (India)
Field visit and training in Tamil – Nadul (India) August 2012 Understanding Agricultural Index Insurance Field Visit and Training in Tamil-Nadu (INDIA) August 2012 Field visit and training in Tamil – Nadul (India) August 2012 Summary Introduction ....................................................................................................................................................... 3 The organisers ................................................................................................................................................... 4 Destination of the field visit .............................................................................................................................. 5 Background to agriculture insurance in India ................................................................................................... 6 Highlights from the Study Visit .......................................................................................................................... 7 Highlights of 27 August 2012:Understanding Agricultural Index Insurance ................................................. 7 Highlights of 28 August 2012: Is Weather Index Insurance, really Insurance? ........................................... 10 Highlights of 29 August 2012: Thiruverkadu village, Nagapattinam district ............................................... 12 Highlights of 30 August 2012: District Central Cooperative Bank (DCCB) and Kil Anupampattu village, Cuddalore district ........................................................................................................................................ 14 Highlights of 31 August 2012: Credit delivery system in India, piloting weather index insurance and creating a microinsurance knowledge portal. ............................................................................................. 16 Main lessons learnt ......................................................................................................................................... 17 Appendix 1 - List of Participants and biographies ........................................................................................... 19 Appendix 2 - List of Speakers........................................................................................................................... 26 Appendix 3 - Participant Views........................................................................................................................ 31 Field visit and training in Tamil – Nadul (India) August 2012 Introduction With 22 million farms covered by a yield-based index, 3 million by a weather-based index insurance and 340.000 farms covered by an insurance combining the two indices, India is probably today the most innovative and experienced country in agricultural index-based insurance in the world. Given that agricultural sector contributes to 18 percent of GDP and employs 60 percent of the population, the Government of India closely monitors meteorological risks and plays a key role in the financing of agriculture in general and agricultural insurance in particular. Climate risks, including rainfall, have a significant impact on the yields of farmers whose farms have an average size of 1.2 hectares, are rarely irrigated, and poorly supplied with water and thus dependent on the monsoon rains. While the first yield indices were developed in 1979, the first meteorological agricultural insurance indices were sold in 2003, linked to agricultural credit. From August 26 to 31, the Grameen Crédit Agricole Microfinance Foundation, in partnership with the Centre for Insurance and Risk Management (CIRM) organized a study tour on agricultural index-based microinsurance in India, with the starting point of the visit the city of Chennai, in the south of the country. The main objective of this trip was to learn and analyse what has been done to date in India to cover small holder farmers against the risk of crop loss with index insurance. In addition to having significant involvement from the government, India has also experimented with various types of indices and has extensive experience with private and community programs as well. The 23 participants that were eager to learn from India’s long and varied experience came from four continents and 12 countries (Azerbaijan, Benin, France, Germany, Guatemala, Nigeria, Philippines, Senegal, South Africa, Kenya, Togo and Uganda). Participants also had diverse professional backgrounds and included regulators, insurers, managers of microfinance institutions, private foundations, donors, and academia (See the Appendix 2 and 3 for the complete list of participants and speakers). During the week, participants learned about the benefits and issues associated with these types of risk management tools. At the end of the stay, everyone left with a clearer picture of the conditions for success in their respective countries for the implementation of these mechanisms. The two-day field trip gave the participants the opportunity to hear first-hand from Indian farmers about their experience with index insurance. The participants and organisers at the Conference venue in Chennai Field visit and training in Tamil – Nadul (India) August 2012 The organisers Grameen Crédit Agricole Microfinance Foundation encourages the development of local microfinance institutions and of social business enterprises in developing countries. The Foundation supports its partners by offering suitable financing in the form of loans, guarantees or equity investment, as well as technical assistance. The main focus is on partners with a strong social mission mainly targeting women and rural areas; essentially in Sub-Saharan Africa, the Middle East, North Africa, South Asia and Southeast Asia. In line with its mission to contribute to the fight against poverty by facilitating rural populations to access financial services, the Foundation has recently started exploring the sector of agricultural microinsurance. The Foundation believes that protecting the poorest against life and natural hazards is an essential part of microfinance and aim to include enterprises responding to this challenge amongst its investment partners. In order to foster the emergence of such partnerships in the sector of agricultural insurance and to complement its microfinance activities they are currently supporting research and pilot projects such as the following two agricultural microinsurance initiatives: • A research programme, in partnership with Pacifica, Astrium Spot Image and the Europlace Institute of Finance Foundation, that aims to prepare index-linked crop insurance models for developing countries. • The Crop Insurance Sahel project: the Foundation is providing technical and financial assistance for this crop microinsurance pilot scheme, directed by Planet Guarantee, in four West African countries (Senegal, Mali, Burkina Faso and Benin). It will offer minimum protection for 60,000 small farmers in these countries over a four-year period. The Foundation is also active in the development of social performance indicators in the microinsurance sector and is pursuing smaller-scale research projects with its sister organization FARM (Fondation pour l’Agriculture et la Ruralité dans le Monde). More information on: www.grameen-credit-agricole.com The Centre for Insurance and Risk Management (CIRM) is a non-profit organization engaged in a variety of action research initiatives with insurers, NGOs and regulators to design and promote innovative insurance products and to improve knowledge on riskmitigating mechanisms. It is committed to stimulating greater market outreach of risk management solutions among vulnerable households through its active involvement in research and design in various microinsurance interventions. It has four major focus areas under microinsurance: • Health • Livestock • Agriculture • Catastrophe It focuses on building and disseminating sectorial knowledge and expertise through its: • Market Making • Capacity Building • Policy Advocacy efforts CIRM is well connected with the ILO Microinsurance Innovation Facility; have carried out several studies and seminars on the topic of agricultural insurance and have good references for such activities. They are the best placed organization to ensure that the visits include the major stakeholders in the sector and are well planned. They are based in Chennai, the capital of Tamil Nadu. More information on: www.cirm.in Field visit and training in Tamil – Nadul (India) August 2012 The organisers Destination of the field visit The destination proposed was the state of Tamil Nadu which has a high penetration of agricultural insurance. Agriculture is the most predominant sector of the economy of Tamil Nadu. 70% of the state’s population is engaged in agriculture and allied activities for their livelihood. The principal food crops are rice, maize, jowar (cholam), bajra (cumbu), ragi, and pulses (Bengalgram, Redgram, Greengram, Blackgram and Horsegram). The cash crops include cotton, sugarcane, oilseeds, coffee, tea, rubber, coconut, gingelly and chillies. The important horticultural products are bananas and mangoes. Paddy is grown in large excess because rice is the main staple food of the state. The Central and Tamil Nadu State Government are continuously taking efforts to make Agriculture, which is a primary sector, a growth engine for economic dvelopment of the State.1 1 http://en.wikipedia.org/wiki/Agriculture_in_Tamil_Nadu Field visit and training in Tamil – Nadul (India) August 2012 Etat du Tamil Nadu Location in India: South India Area (Sq Km): 130 058 Population: 62 110 839 Density (per Sq. Km): 478 State Capital: Chennai Climate: Tropical Principal Language: Tamil Other Languages Spoken: English, Hindi and Kannad Pondicherry is the capital of the Union Territory of Pondicherry and gathers over 700 thousand inhabitants. Its cotton spinning mills foster an intense harbour activity. In a part of the city, French street names and buildings are still reminding that Pondicherry was previously a French colony.2 Background to agriculture insurance in India Agriculture is the predominant source of livelihood in India and contributes to nearly 18 per cent of Indian GDP, employing about 60 per cent of the labour force. Weather phenomenon like excess of precipitation is a major yield risk for farmers as a majority of the agricultural land is not irrigated and the limited irrigated areas suffer from inadequate and unreliable water. The major instruments used by the government to protect farmers from agricultural variability include crop yield insurance scheme, procurement of food grains at minimum support prices and calamity relief funds. Problems exist with both the design and delivery of crop insurance schemes. Some of the critical problems include moral hazard, adverse selection and basis risk, which is specific to index based insurance. These problems could be overcome with rainfall insurance and a well-developed rainfall measurement infrastructure. Agricultural insurance in India has graduated from Comprehensive Crop Insurance Scheme (in 1985-98) to yield index based National Agricultural Insurance Scheme (NAIS operational since 1999) and from NAIS to Weather Index-Based Crop Insurance Scheme (WBCIS, pilots started in 2003-04) to modified National Agricultural Insurance Scheme (mNAIS, pilots started in 2010-11). Two pilots are currently being studied in order to replace the NAIS: the Weather Based Crop Insurance Scheme (WBCIS) and the modified National Agricultural Insurance Scheme (mNAIS). The main difference is that the WBCIS is based on a weather index and the mNAIS combines the area yield with a weather index. For a detailed presentation of the agriculture insurance in India see the Appendix N°1 2 http://en.wikipedia.org/wiki/Pondicherry_(city) Field visit and training in Tamil – Nadul (India) August 2012 Highlights from the Study Visit Highlights of 27 August 2012:Understanding Agricultural Index Insurance Sources: blog.cirm.in The first day of the workshop was flagged off with a presentation by CIRM on the context of agricultural insurance in India. Attention was devoted to ways which may improve the “client value” by addressing the three key challenges: reducing basis risk, introducing value added services and creating simple products. There are two types of basis risk: one is geographical, caused by the distance from the weather station to the insured land, the second is linked to the contract design, in case the index does not follow properly the effective yield or in case the contract only covers rainfall for example, and no other risks that can affect the crop. Basis risk affects the client’s perception of the product and can be very detrimental to the product’s survival in case the farmers experience a loss that is not covered by the insurer. Incomplete data is also a risk to the insurer as it will lead to an extra price load from the re-insurer. Increasing and improving data can be costly but can lead to the reduction of basis risk and the decrease the price of reinsurance for example by increasing the number of weather stations or introducing the use of remote sensing for example. An example of added services was the provision of weather-related forecast information to the farmer via SMS which was included in the insurance package. With the increasing mobile access in Africa, this was proposed as an interesting solution to adopt for some participating countries. Ashutosh Shekhar, Agricultural Analyst at CIRM Innovative weather insurance projects undertaken by CIRM include simple and flexible small size contracts to allow customized insurance cover for small policy holders. That way, farmers can insure a part of their risk, by selecting specific crop phase and the cover limit they need, and hence pay smaller premiums in the bargain. With a low ability and willingness to pay in countries launching weather insurance, such contracts could be very valuable. This was followed by Mr. Kolli N. Rao’s who is part of the Agriculture Insurance Company of India Ltd (AIC). He stressed the need for index-based crop insurance in India, given the over-reliance of agriculture on the vagaries of the monsoon and non-availability of past records on yield. An example of how payouts are calculated under the yield-based National Agriculture Insurance Scheme (NAIS) was shared. • First, based on yield variability at the district level over the last ten years (650 districts in India), a coefficient of variation is calculated, according to which areas are classified as high, medium and low risk. • Second, a simple average of previous seven years yield data was collected and verified by the State government, and taken as the guaranteed yield, compared with current year’s actual yield to calculate the shortfall. This feeds into the claim pay-out calculations. Mr. Kolli N. Rao is Chief Risk Officer, and is Head of the 'Product Development' and As NAIS was progressing, attempts were made to develop a system 'Reinsurance' within Agriculture Insurance whereby claims could be settled quicker and with lower Company of India Ltd. (AIC) operational costs (i.e. the expensive and long crop cutting experiments at the end of the harvest to determine the average yields). As a consequence, weather Field visit and training in Tamil – Nadul (India) August 2012 insurance with alternative index parameters (rainfall, consecutive dry days, temperature, wind speed, humidity) was launched in 2003 as a pilot by ICICI Lombard and by AIC in 2004 known as the Weather index Based Crop Insurance Scheme (WBCIS). This pilot went on till 2007, with no subsidies from the government during this four-year period. In order to scale up the outreach of the WBCIS, in 2007, the government provided premium subsidies. The sector also developed rapidly due to the very dense prevalence of agricultural loans in in India. Under NAIS, the government subsidized the claims (which in most years exceeded the total premium collected). Under the WBCIS the government subsidized the premium. Currently, three distribution channels are being used by AIC for distributing weather insurance contracts; Rural Financial Institutions (RFIs) – commercial banks, regional rural banks and cooperative societies. Apart from this, non-banking institutions such as insurance intermediaries, micro insurance agents and postal departments are also used, as these have extensive grass root networks. While Mr. Rao elucidated on several dimensions of weather-based insurance, one aspect became the topic for much deliberation. Mr. Alhaj Lubega, CEO of Insurance Regulatory Authority, Uganda and Chairman of the East African Insurance Supervisors Associations (EAISA) enquired “Considering the case of inadequate weather stations in developing countries, would Mr Rao recommend them to begin with a yield based insurance over the weather based insurance? Also, if the latter was chosen, what would be the first steps in setting it up a sustainable weather insurance market?” Mr Rao responded “If historical yield data at the micro-level is available then area yield based insurance can be taken up. In developing nations, this information is rarely available, and hence weather-based insurance is the logical option. For a weather-based insurance to effectively integrate village level data, India needs 8000 weather stations and 32,000 rain gauges. Moreover, the annual cost of maintaining these stations, is approximately 25% of installation costs which can vary between 1000 – 40000 USD. At present, we have less than 25% of this infrastructure. To improve the outreach of our insurance products we need to finance and maintain the mechanisms that collect and update crop production and weather data.” Mr. Alhaj Lubega, CEO of Insurance Regulatory Authority, Uganda and Chairman of the East African Insurance Supervisors Associations being greeted by the farmers in the Kil Anupampattu village AIC is currently trying to reach the non-borrowing farmers by piloting a savings-linked insurance product as well as a product which pays back 25% of the premium in case weather index does not trigger payout but community leaders enforce that there is crop loss. For the participants to understand the government’s commitment to agricultural insurance he stated that 25 billion USD is give in subsidies for fertilizers per year compared to 2 billion USD in subsidies for crop insurance. Automated Weather-Station Left: anemometer, thermometer, hygrometer and a solar panel for data transmission. Right: rain gauge Mr. Rao highlighted the important role of private players in providing village level data. However, the data integrity needs to be controlled through reliable regulation, to guarantee data collection according to standards and specifications prescribed by the government, thus ensuring a transparent and reliable market growth. Field visit and training in Tamil – Nadul (India) August 2012 In the afternoon, M. Azad Mishra from the HDFC ERGO presented different ways in which weather index-based insurance products may be priced. The presentation begun by listing the perils insurance can cover (deficit/excess of rainfall, extreme fluctuations of temperature, high relative humidity, high/low wind speed, low solar energy / sunshine hours or a combination of them). For those products, the risk period may be fixed or floating, and the payouts can be fixed or linked to the national. Then M. Azad Mishra from the HDFC ERGO the pricing may follow one of those models: Burn analysis (calculation on the past actual claims of the premium leading to a claims/premium equilibirum) Arbitrage pricing model Normal approximation Monte Carlo Simulation (simulation of the data a great number of times) In most cases, the payout is a fixed, staggering payout. For example, a low-rainfall product pays a certain amount of money per millimeter below a threshold. A maximum payout is defined, paid below the threshold named “exit”, see the figure below. Payout of a low-rainfall product HDFC ERGO implements the Weather index-Based Insurance Scheme (WBCIS) since 2010 and offers also the modified National Agricultural Insurance Scheme (mNAIS) in 13 states. They have covered more than 260 thousand farmers and around 400 thousand hectares till 2012. During the 2011-2012 campaign, 20% of the purchasers were non-loanee farmers. This success stems from marketing efforts, among which interactive meetings in villages or a van touring to get people aware of insurance and of their offer. To conclude this first day, M. K. Gopinath from the IFFCO TOKIO General Insurance (ITGI), enlightened us on the strategies employed for sustainable weather insurance distribution. ITGI is the blend of IFFCO, the world’s largest fertilizer manufacturer in M. K. Gopinath from the IFFCO TOKIO General Insurance (ITGI) cooperative sector, and of Tokio Marine Nichido, Japan’s oldest and largest general insurance company. He started with a quick overview of the evolution of agriculture insurance in India. Field visit and training in Tamil – Nadul (India) August 2012 M. K. Gopinath presented the “Blue ocean strategy” by Kim and Mauborgne, which consists in going from the market to the minimal purchasers, to the people aware of the product but under-price constraints, to the rural population who never used the product. This is the way to profitable growth (see the figure on the right). An impediment to this strategy is the difficulty to reach the rural population. The customers are less aware of the insurance benefits, insurance itself is seen as a bad omen. For them, there are too many formalities and the settlement time is too long. On the other hand, the insurer has high claims ratios, high moral hazard and it is costly for him to get to the rural population – not to speak of the fraud and robberies phenomenon. All these points result in low penetration. The going rural-blue ocean strategy ITGI’s solution is first to use IFFCO’s network, and to by Kim and Mauborgne complement it with agents from cooperative societies. They also pay claims via cheque distribution in public functions. These channels are trustworthy intermediaries and can help to client education. Highlights of 28 August 2012: Is Weather Index Insurance, really Insurance? The day started with two interesting presentations. While the first focused on the importance of information (data) for weather risk and natural catastrophe management, the second delved into product design innovations. Field visit and training in Tamil – Nadul (India) August 2012 Mr. V.S. Prakash from the Karnataka State Natural Disaster Monitoring Centre (KSNDMC) began by stating that the approach to disaster management has shifted from rescue/relief post disaster, to disaster risk reduction by using Information Communication Technology (ICTs). According to Mr. Prakash the first step in disaster management is proper measurement of weather parameters. “If it cannot be measured properly, it cannot be managed properly”. V.S. PRAKASH is the Director of the He presented various tools used to capture and interpreting Karnataka State Natural Disasters weather data and to disseminate the information. One specific Monitoring Centre, an autonomous body example he used to illustrate how they addressed the challenge affiliated with the Department of Science was the use of solar powered telemeter rain gauges in areas & Technology, Government of Karnataka, where the electricity was unreliable. The data collected from India these rain gauges is transmitted every fifteen minutes using GPRS, and feeds into a GIS map, which shows differential rain levels at villages that are 2.5 kms away from each other. This is made possible by using a geo-statistical technique to interpolate the value of the rainfall at an unobserved location from observations of its value at nearby locations (kriging). In this process any localized error or fraud shows up as an anomaly allowing for corrective measures. Mr. Navin Sharma from ICICI Lombard outlined the journey of his organization from being the first in undertaking a pilot project with 230 farmers covering two crops in 2003, to being a company providing services to over ten million farmers covering more than 45 crops across multiple states. Once the premium subsidy was achieved for the WBCIS, the sector achieved phenomenal growth, and there are currently six private insurers offering weather insurance contracts in India. What caught the attention of the participants was that ICICI Lombard has introduced this indexNavin Sharma is the Vice President – based scheme to non-farm sectors dependent on the weather such Health & Weather, ICICI Lombard GIC as lac (a scarlet resinous secretion of a number of species of insects Limited used in dye production), seri-culture, salt pans and brick kilns. Discussions also focused on products offered to corporate clients such as Pepsico (weather insurance for potato growers), Gujarat Heavy Chemicals Ltd (covers losses incurred in salt production) and Air India (covers losses incurred on delay in flights due to heavy fog). Under weather insurance, a payout can be made at various stages as harvest losses are expected. For example, payouts can be made for deficit rainfall in the sowing phase allowing the farmer to buy replacement seeds or rent out water pumps and manage to avoid actual full losses. This is where weather insurance differs from classical insurance, where payouts are made against actual experienced losses. It is relevant here to point out the difference between a weather ‘indexed’ contract and a traditional insurance contract – as in the latter, indemnities are paid only after actual damages occur and not against proxies. A weather index insurance contract can be considered as a weather derivative or a weather insurance contract. While the difference between the two might be important from regulatory and legal viewpoints, from an economic perspective, both instruments share the common feature of being triggered by an underlying weather index. The decision to keep weather contracts in the form of insurance, or treat it as a derivative is the prerogative of the nation under consideration. Field visit and training in Tamil – Nadul (India) August 2012 In the afternoon, M. Natu Macwana from the Coastal Salinity Prevention Cell (CSPC) explained the stakeholder engagement in product design and distribution. He underlined the importance of weather-risks managing tools such as insurance. As it can be seen on the figure below, weather risks are non-controllable production risks. More than 90% of crop losses result from improper rainfall. For example, the years 1999 to 2002 were a continuous drought period, followed by five years of heavy rainfall, from 2003 to 2007, which makes risk management a difficult exercise. M. Natu Macwana from the Coastal Salinity Prevention Cell (CSPC) Albeit insurance products be important tools, they are totally useless if constructed without farmer’s involvement For example in 2010, almost no claims were paid. As a consequence, a half of the insured quitted the scheme. This is because the triggers weren’t at a coherent level. The CSPC met agri scientists, farmer groups and NGOs in order to fix the outstanding problems, and it improved the take up. The modifications affected not only the trigger levels, but also the length of the periods insured and the premium level. The farmers trusted the product, a product they helped to build, a product which responded better to their needs. A slide from M. Natu Macwana’s presentation, distinguishing controllable and non-controllable risks To conclude, M. Natu Macwana promoted the “Four Ps”: Process, Product, Partners and Promotion, all linked by a constant: open and participatory dialogue. From the Field Visit: Engaging with community based organisations, cooperative banks and farmers Highlights of 29 August 2012: Thiruverkadu village, Nagapattinam district Nagapattinam district, located in the Cauvery delta, is a major rice producer. The region is prone to many types of natural disasters and has experienced flooding of the river Cauvery, the 2004 Tsunami and big cyclones. Moreover, farmers in the region (mostly marginal and small landholdings) rely on Cauvery water for crop production. During the first day of the field visit, the participants interacted with members of Kazhi Kadaimadai Farmers Federation (KKFF), a Community Based Organisation (CBO) who work with a group of farmers who purchased NAIS (yield index based insurance product) and Varsha Bima (weather index based insurance product), offered by AIC. Field visit and training in Tamil – Nadul (India) August 2012 KKFF started as a CBO to rehabilitate tsunami affected people and later developed into a service model, providing agro-advisory services, seed production, warehousing facilities and crop insurance services. It is through this model that KKFF got involved in rendering services related to agricultural insurance offered by AIC. Farmers become members of KKFF and can purchase the insurance services upon payment on a nominal annual membership fee (approximately 3 USD per acre of land). The challenges that KKFF encountered in providing crop insurance were: low client awareness leading to non-renewal, non-availability of bank accounts and/or relevant documents lack of initiative among banks and delays in claim settlement A bag of rice produced by the farmers in Nagapattinam Over the years, KKFF developed strategies to overcome these difficulties, which include, awareness raising among farmers and sensitizing banks on the importance of insurance provision to small and marginal farmers. Information provided by KKFF was complemented by interaction with farmers, who had taken-up products, underwritten by AIC. Discussions with the farmers revealed that they were unaware of agricultural insurance before being affected by the Tsunami. While several farmers were insured by default when they opened bank accounts for agricultural loans (as the statesubsidized agriculture credit is bundled with agriculture insurance) they were ignorant of it. Deliberations with the farmers revealed that they had good product knowledge. They explained that while in the case of NAIS, the insurance was bundled with the loans taken by the farmers and was subsidized by the government, Varsha Bima, which was introduced in the district on a pilot basis was not subsidized by the government. Farmers also expressed their discontentment on both the products. In the case of Varsha Bima, it was related to the claim payment procedure. One farmer said, “The product (WBCIS) was designed to pay-out upon 25 CDDs (Continuous Dry Days). I experienced 23 CDDs and a very light shower in the last two days, but I did not receive any claim”. The farmers of KKFF sharing their experiences with agriculture insurance In the case of NAIS, farmers felt that the payouts were very slow, and often it took almost six months to receive the payouts. Farmers also commented that one of the major problems of insurance is the index, because it is based on a large region and the vulnerability of a particular village is not taken into consideration. They felt that crop cutting experiments must be conducted at a village level. Challenges the mNAIS aims to address. Participants asking questions to the farmers Another problem is continued low awareness among farmers, despite proactive efforts taken by agriculture departments as well as the insurance company. Before the end of the day, the group also visited an automated weather station operated and managed by one of the villages. Field visit and training in Tamil – Nadul (India) August 2012 The farmers and the study visit group Automated Weather Station Highlights of 30 August 2012: District Central Cooperative Bank (DCCB) and Kil Anupampattu village, Cuddalore district The second day of the field visit began at the head office of the District Central Cooperative Bank (DCCB) which has 100 000 members, where the participants learnt about the socio-economic and demographic profile of farmers, cropping patterns in the district, the role played by the bank in agricultural financing and the distribution of the modified National Agricultural Insurance Scheme (mNAIS). There are 2 283 000 people in Cuddalore (1.1 million men and 1.13 million women) and the total cultivated land in the district is 256 000 hectares of which paddy is 123 000 ha; sugar cane 37 000 ha; groundnut 13 000 ha. Farmers are categorized as follows: • 2.5 hectares < marginal farmers • 5 ha < small farmers • 5 ha > large farmers Up until 2012 the DCCB has lent more than INR 2000 million (36 million USD) to the farmers of the district for carrying out agriculture-related activities. Loans are provided either in cash (given directly to the farmer for meeting cultivation expenses) or kind (credit in the form of agricultural inputs, hybrid seeds etc). Loans are also based on the cropping season – Kharif (April-December the summer crop) and Rabi (January-March the winter crop), as well as the variety of crops grown in each season. Loans are provided only if the farmer is a member of the bank and has possession of all relevant land-holding documents. The dates for repayment depend on the harvest schedule of the crop. Farmers are exempt from payment of interest if loans are repaid on time but an interest rate of 8% is applicable in case of any delay. During the growing season the interest rate of 7% is applied to the loan which is subsided by the Central government (4%) and the State government (3%). Keeping in mind the vulnerability of the farmer, the cooperative bank has introduced the Agricultural Jewel Loan, whereby farmers can take a loan for meeting their personal expenses, in case of failure of the monsoons. The jewelry acts as collateral, with the rate of interest being 7% (which is close to half of what other banks charge). Upon hearing this one of the participants was curious to know what happens when the farmer is unable to repay the agricultural loan and has also taken a Jewel loan. “How does he survive with this repayment burden?” The DDCB’s assistant general manager replied “Insurance comes to his rescue. Also, if the first loan is not repaid, the farmer is not eligible for another loan. This is an incentive for repayment.” Field visit and training in Tamil – Nadul (India) August 2012 The DCCB also provides credit for other activities such as poultry and fisheries as an alternate livelihood opportunity to help coping when crops fail. Warehouse facilities are also provided, whereby farmers can store their produce in case of lack of demand, take a loan to on 75% of the value of the produce and sell it when there is demand and prices rise. The loan can then be repaid after sale of this produce. The agricultural loan and warehouse receipt loan are independent, and the farmer is eligible for this loan even if he has defaulted on the first. Moreover, crops stored are insured through Primary Agricultural Cooperative Society (PACS). The Banks stated District Central Cooperative Bank (DCCB) with the AIC representative that they have a 90% recovery rate for the crop loans and 89% recovery for their entire portfolio. Since insurance was introduced, nearly 50% of their outstanding loans have been covered by insurance. The farmers who had availed loans of the DCCB chose mNAIS as the preferred product, “As it has managed to bring about 90% accuracy at the village level by increasing the number of crop cutting experiments. Also, there is faster claim settlement, at each crop stage, from sowing to harvesting.” The second half of the day was spent on a small farm in Kil Anupampattu village, owned by Mr. Ravindran, also the president of the farmers’ federation in the region. An elderly farmer spoke to the participants about the difficulties faced by farmers in the region due to floods and droughts. Their situation is also worsened by the low Minimum Support Price (MSP) – a price risk social protection tool used by the government, where a minimum price for specific crop is defined at which the state purchases the crop from the farmer. Farmers of the Kil Anupampattu village sharing their experiences with agriculture insurance with the visiting group Farmers stated that mNAIS has a good approach as it provides interim claim settlements after each crop stage and is based on yield and crop cutting experiments, rather than just weather data. On the latter is problematic as, “the number of weather stations in our district is low and weather calamities depend on the announcements by the government. We feel that mNAIS is more transparent in this sense”. They also feel that the payouts have are larger. Group picture with the farmers from the Kil Anupampattu village Field visit and training in Tamil – Nadul (India) August 2012 Highlights of 31 August 2012: Credit delivery system in India, piloting weather index insurance and creating a microinsurance knowledge portal. India has the fourth densest financial network in the world and over 80% of the agriculture insurance in India is distributed leveraging the strong Regional Rural Bank (RRB) network. The National Bank for Agriculture and Rural Development (NABARD) is the apex agency with the national mandate to facilitate the credit to promote and develop agriculture. Mr. Sundar, General Manager of NABARD branch in Chennai provided a holistic picture of the formal credit delivery system in the country stating that while NABARD does not play a regulatory role, it is engaged with credit refinancing, institutional development and innovative initiatives to achieve its mission. Two issues are of particular importance: First, the two important models of subsidies provided by NABARD to encourage banking institutions to serve farmers-namely, interest and capital subsidies. The interest rate for lending to agriculture currently is capped at 7% and the banks that lend at this rate get an interest subsidy of 2% from the government. Therefore the farmer receives the credit effectively at 5%. The interest subsidy of 2% is provided to the banks by NABARD. On the other hand, capital subsidy is provided at a comparatively smaller scale to certain agri-allied sectors such as dairy and ranges from 25-33% of the total loan value (depending on the vulnerability of the borrower) to encourage households engage in such businesses. Second, the various players in the banking system. While RRBs operate at the district level and can cater for their financial needs, the Cooperative Banks serve village level Primary Cooperatives and often need a financial leg-up from NABARD to meet the credit needs of their members. NABARD assists these institutions to meet these credit needs. Mr. Sundar identified several challenges in ensuring that insurance is a viable proposition for the farmer. NABARD is focusing on the small farmer and aggregation of farmers to enhance efficiency – producers’ organisations are being formed so that farmers have a larger share of the end customer’s rupee and closer access to the markets. He concluded by saying that the focus is “not on standard banking but development banking” and stating that the government’s mission is that by 2015 all families should have a savings account. R Sundar is currently the General Manager, National Bank for Agriculture In the process of kick-starting the weather index insurance and Rural Development (NABARD) at the market in a country, Mr. Shekhar of CIRM pointed out the key Tamil Nadu Regional Office, Chennai steps: The first step is a Needs Assessment which includes the identification of the weather-crop correlation data including irrigation needs, crop cycle and extent of historical weather related losses. As obtaining data in developing countries in Asia and Africa is difficult, using remote sensing technology may be a good option. With regards to piloting, selection of area is critical – an area that is vulnerable to weather risks and not too far (about 15-20 kms) from a weather station and having good infrastructure that aids the design and distribution. Lastly, collaborating with a strong reinsurer is crucial. He also outlined the need for innovative hybrid products, such as mNAIS, which is an amalgam of the area yield and weather insurance index that has different payout rates across different stages of the crop cycle. Field visit and training in Tamil – Nadul (India) August 2012 Ms. Rupalee Ruchismita of CIRM, outlined the need for facilitative infrastructure with special focus on regulatory mechanisms governing insurance and the need for a National Databank. Broadly, there are two regulations in India which focus on rural and microinsurance business: 1. Rural & social sector compulsory obligations under which all insurance companies are expected to undertake a certain percentage of their business from rural areas (increasing up to 8% for general insurance companies). Rupalee Ruchismita is the founding head of CIRM 2. As per the Microinsurance Act (2005), the company is allowed special leniency while designing and distributing products registered with IRDA as microinsurance. Even though the Micro Insurance Act was supposed to be facilitative, the data as seen on Microinsurance Map shows how the premium collected by insurance companies from registered ‘microinsurance’ products is nominal, despite the growth in the compulsory ‘rural’ portfolios. The good news is that, partly driven by the large state premium subsidies for health and agriculture insurance products, many private insurers are exceeding their rural portfolio targets. When Ms. Ruchismita presented the Microinsurance Map (MIM) databank initiative which is a publicly available, free-of cost database presenting a spatial mapping of best practices and scale of microinsurance practices in the country. It seeks to deliver three outputs (a) risk data that will aid in the development of actuarially priced products; (b) synthesize market information on products and delivery processes and (c) create premium calculators to generate indicative pricing of products. Any country can take this framework and can start mapping the insurance business of its insurers and distributors like MFIs, type of businesses undertaken, products created etc, which aids in comparison of agricultural portfolios to kick start the microinsurance sector in developing countries. Main lessons learnt Martine Dahoun being greeted by the farmers in the Kil Anupampattu village During the week, participants learned about the benefits and issues associated with these types of risk management tools. At the end of the stay, everyone left with a clearer picture of the conditions for success in their respective countries for the implementation of these mechanisms. As expressed by Martine Dahoun, Head of Regulation at the Insurance Department of the Ministry of Finance in Benin, “As regulators, we can’t just wait for the products to appear. The insurance industry is constantly changing and we must adapt to this reality. We must be part of this movement and encourage the creation of new products.” Another important lesson is that the value of products can be enhanced by adding services to the insurance. For example, insurers can offer weather-related forecast information to farmers via SMS as part of the insurance package. With the increasing mobile access in Africa, this was proposed as an interesting solution to adopt for some participating countries. The problem of reaching scale was partially solved in India by making insurance mandatory for agricultural loans. Although in reality this is only applied to 22% of loans, it has helped to significantly increase the volume of insurance policies. In addition, the federal government and the states subsidize between 50 and Field visit and training in Tamil – Nadul (India) August 2012 70% of premiums and require private insurance companies to achieve a defined percentage of their turnover in rural areas. Whether all countries can afford to, or should put in place such subsidies and mandate services from the private sector is a subject ripe for lively debate. The design of an insurance product based on weather data is a complex exercise requiring close collaboration with the government and its agencies. The coupling with other interventions such as the provision of credit or farm inputs facilitates distribution at the village level. Oscar Chamale, of the insurance company Aseguradora Rural from Guatemala was impressed by the close working relationship between the Farmers’ organizations and their insurer, ”I was surprised by the involvement of the farmer organization in the management of the product and they were even responsible for the claims process. It’s very much integrated with their other activities and hence becomes a part of the value chain. In Guatemala, I have not yet seen any farmer organization take on this role.” In Tamil Nadu, Farmers’ organization helps its members to fill in the subscription forms and works with the insurance company to accelerate the payout process and to refine index. Momath Ndao, Controller of Insurance Commissioner in Senegal engages in lively classroom debates Oscar Chamale of the insurance company Aseguradora Rural from Guatemala visiting a weather station The two-day field trip gave the participants the opportunity to hear first-hand information from Indian farmers about their experience with index insurance. Momath Ndao, Controller of Insurance Commissioner in Senegal, summarizes the encounters: “The farmers are the key actors at every stage of delivering agricultural insurance and need to be involved at each step. We need to listen to the farmers as they are always smarter than us. They know what they want and what is good for them, just like the Senegalese farmers.” Field visit and training in Tamil – Nadul (India) August 2012 Appendix 1 - List of Participants and biographies Georges A. Abbey Georges Abbey is a lecturer of Farm Production Economics, Agricultural Marketing and Agribusiness, Agricultural Financial Management and Environmental Economics at the major public University of Togo – University of Lome. He worked on several research teams sponsored by regional and international institutions such as ICRAF (International Center for Research in Agroforestry), SADAOC (Sustainable Food Security in Central West Africa) Foundation, International Institute for Tropical Agriculture (IITA), CORAF/WECARD (West and Central African council for agricultural research and development) and UNU/INRA (United Nations University Institute for Natural Resources in Africa). Currently he serves as a consultant to the World Bank Group and assists the coordinator of the GIIF (Global Index Insurance Facility) Regulatory and Policy Capacity Building Window in Africa in the monitoring of the development and implementation of GIIF pilot projects. Mr. Abbey holds a Ph.D. in Agricultural Economics, with a minor in Agricultural Finance. Adébayo Pacôme Bonou Adébayo Pacôme Bonou is the Head of AMAB Production Service (Agricultural Mutual Insurance of Benin) - a mutual insurance company specializing in coverage of insurance risks within agriculture and livestock. Previously he worked as the Head of the Federal Agency of Insurance at Benin African Life. Mr. Bonou holds Master of Science and Technology of Insurance and a Bachelor of Science in Mathematics. Oscar Chamale Oscar Chamale, a Guatemalan national, is the Business Director of Aseguradora Rural (Banrural Financial Group S.A). Oscar has more than 10 years experience in insurance sales and marketing, with focus in personal insurance, market study and in the design and launch of new products. He holds a bachelor degree in Business Administration and a post-graduation certificate in Marketing. Field visit and training in Tamil – Nadul (India) August 2012 Chris Cherry Chris is a qualified actuary currently lecturing full-time at the University of the Witwatersrand in South Africa. Upon completion of his actuarial exams in 2009, he worked for Quindiem Consulting in their non-life insurance team for two years. In addition to lecturing, Chris is also currently studying theology through the University of South Africa (UNISA). Chris' interest in microinsurance is due to its great potential to improve the lives of so many individuals. While lecturing, Chris intends to complete his masters by researching a microinsurance related topic (potentially index-based insurance). Sessimè Martine Dahoun Sessimè Martine Dahoun is the Head of Regulation and Licensing Department of the Insurance Department in the Ministry of Finance in Benin. She is an Insurance Administrator - Economist, Commissioner Controller, graduate of the International Institute of Public Administration in Paris & International Institute for Insurance of Yaounde. Constance Collin Constance Collin is a French student in Statistics and Finance, registered both at Ensai (engineering school of statistics) and at the University of Rennes. Currently establishing the price of an index-based crop-yield insurance, Constance will soon begin a PhD on index-based agricultural micro-insurances, in partnership with Pacifica (a French insurance company) and the Grameen Credit Agricole Foundation. Mouhamadou M. Fall Mr Fall is a water and forestry engineer, as well as an engineer in agro-economics and holds an MBA in company management. For ten years he worked as a national expert for the Senegalese government managing projects financed by the FAO, USAID, IFAD, World Bank and West African Development Bank. Thereafter he joined the private sector. First as a permanent member of the direction committee and development coordinator of the Senegalese mutual for agricultural insurance of the SONAM Group (National company of mutual insurances). Thereafter he joined the FAIB as their director, the main executive agency of the African Development Foundation (the American congress' public foundation for development in Africa). In 2005 he joined the Senegalese agency for rural electrification and became their director of private sector projects. Since 2008 he is the deputy director of CNAAS – The national agriculture insurance company of Senegal. Field visit and training in Tamil – Nadul (India) August 2012 Mr. Ayoola Paul Fatona Mr. Fatona Ayoola Paul is a member of the project team set up by the Nigerian Agricultural Insurance Corporation to explore the possibility of introducing Weather Index Insurance Contracts into the Nigerian Agricultural Insurance Market. He also served as a member of the committee set up by the Federal Ministry of Agricultural and Rural Development to review the Agricultural policy of Nigeria in 2012. Mr. Ayoola Paul has over twenty years experience in underwriting Agricultural risks in Nigeria with the Nigerian Agricultural Insurance Corporation. He has also worked in various capacities in the operations (technical) division of the corporation. He has the privilege of working with the World Bank team during the recent pre-feasibility study conducted on the establishment of Weather Index Insurance in Nigeria by the World Bank. Mr. Fatona Ayoola Paul is professionally qualified in the field of Insurance, Accounting and Economics and holds a Masters Degree in Financial Management. Vusala Garayeva Mrs. Vusala Garayeva currently is a network coordinator in Azerbaijan Microfinance Association (AMFA) and is responsible for coordinating AMFA projects and services. She is also responsible for organization of major AMFA events like Biennual Conference, Study Tour and provision of coaching to junior programme staff in executing of small scale projects. She has nearly 10 years experience with international Development Organizations. Mrs. Garayeva holds master degree from Azerbaijan University of Foreign Languages. Philippe Guichandut Philippe Guichandut is the Head of Development and Technical Assistance at Grameen Crédit Agricole Microfinance Foundation. From 1986 to 2004, Philippe Guichandut worked for various French development NGOs (France Volontaire, Inter-Aide, Enfants et Développement - Save the Children France, CCFD-Terre Solidaire). He spent six of those 17 years in the field: in Rwanda, India and the Philippines. He was in charge of setting up and monitoring development and microfinance projects. He became the first Executive Director of the European Microfinance Network when it was created in 2004. Mr. Guichandut has been teaching development and microfinance project management for more than 10 years in France and other European countries. He has a Master's degree in Urban Social Development from Université d'Evry and an MBA from the European University of San Francisco. Field visit and training in Tamil – Nadul (India) August 2012 Tiburce Kouton Tiburce Kouton is an agricultural engineer specialised in Economics and Rural Sociology. He is the Director General of Agricultural Mutual Insurance of Benin (AMAB) having previously worked as the Permanent Secretary of the Federation of Unions of Producers of Benin (Benin-FUPRO). Fabrice Larue Fabrice Larue is project manager on the topics of agricultural financing and management of agricultural value chains at the Foundation for World Agriculture and Rurality (FARM) based in Paris. Graduate of HEC Montreal, Mr. Larue has spent some years in Mali and Senegal strengthening producers organizations and marketing services, after having worked as financial adviser for a Canadian bank. At FARM, he is responsible for advocating the importance agricultural financing for agricultural development in West Africa and focuses on improving the links between producer’s organisations and local financial institutions. He also supports producers organizations develop economic services to their members and become economic actors in the agricultural value chains. Bruno Lepoivre Bruno Lepoivre is the Vice-director, Market of agriculture at the Crédit Agricole Assurance Pacifica - the non-life insurance branch of Credit Agricole Group. He is responsible for research, marketing and technical sectors and for 9 years, he has enabled Pacifica to develop a wide range of traditional insurance solutions for farmers, and to explore parametric insurance solutions. Mr. Lepoivre holds a MBA in Agro-Economics. Jimmy Loro Jimmy Loro is a Senior Adviser - Lead Expert at Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH. He specialises in GIZ Remote SensingBased Information and Insurance for Crops in Emerging Economies (RIICE). Jimmy has more than ten years of demonstrated success in managing versatile and challenging programs funded by the GIZ, EU, AusAID, UN, and the Philippine government. In 2010, Jimmy managed the development and pilot testing of the first Area Based Yield Index Insurance (ARBY) for irrigated rice in Leyte Province, Philippines. He is currently overseeing the enhanced ARBY which will use remote sensing to determine rice yield as well as provide vital information to policy makers. Jimmy is married with two kids and is based in Manila, Philippines. Field visit and training in Tamil – Nadul (India) August 2012 Alhaj Kaddunabbi Ibrahim Lubega Alhaj Kaddunabbi Ibrahim Lubega is the Chief Executive Officer of Insurance Regulatory Authority of Uganda and Chairman of the East African Insurance Supervisors Association (EAISA). Alhaj Kaddunabbi has over two decade’s hands-on experience in insurance operations, regulation and supervision. He served as President of Insurance Institute of Uganda, Executive Member of the Parliamentary Union of the Organization of the Islamic Conference, Vice Chair and Member of three distinguished University Councils in Uganda. He was also a Member of Parliament of Uganda for 10 years, where he chaired the Parliamentary Committee on the National Economy and Board of Trustees of the Parliamentary Pension Scheme. He holds a Masters in Economic Policy and Planning and a Bachelor of Science in Economics from Makerere University, Uganda. In addition, he is a Senior Associate and Certified Insurance Professional (CIP) of the Australian and New Zealand Institute of Insurance and Finance (ANZIIF). Momath Ndao Momath Ndao, Controller of Insurance Commissioner (since 1992), is in charge of Microinsurance and training in the Department of Insurance (MEF) of Senegal. He is also the Vice-President of the African Association of Insurance Supervisors since May 2012. In the past, Mr. Ndao has been the Financial Advisor and Representative of Mutual savings Funds for Desjardins Financial Security and World Financial Group in Canada (2008-2011) and Director of Studies of the IIA of Yaoundé (1998-2007). Amadou Ndiouga NDIAYE Amadou Ndiouga NDIAYE is the General Manager of Senegalese National Agricultural Insurance Company (CNAAS) since 2008. He is also the president of Senegalese Insurance Association Communication's group (FSSA) and Vice President of CPI's Financing Workgroup (APIX). Mr. NDIAYE was also the former Managing Director of PROASSUR SA and PROASSUR VIE, Non Life and Life insurance companies of Cameroon. He holds a Higher Diploma in Insurance Studies from Yaoundé's Insurance Institute (IIA) and a Master Degree in Economic sciences from University of Dakar. Hellen Olima Hellen Olima started her career, in 1987, as an insurance officer in the defunct Department of Insurance within the Ministry of Finance, which was elevated to an independent body, the Insurance Regulatory Authority (IRA). She has worked with the Supervisory Organ throughout my working life. Ms. Olima holds a Bachelor of Commerce (Insurance), a Diploma CII and a Masters in strategic Management (MBA). Field visit and training in Tamil – Nadul (India) August 2012 Jean-Luc Perron Since 2007, Jean-Luc Perron has been a driving force in designing and creating Grameen Crédit Agricole Microfinance Foundation, for which he has been Managing Director since October 2008. Mr. Perron began his career with the French Ministry of Agriculture. In 1985, he joined the CNCA (today Crédit Agricole S.A.), where he managed credit activities for agriculture and then financing of large-scale leisure and tourism projects. In 1992, he created Crédit Agricole Consultants, a subsidiary specialised in technical assistance with countries in Central and Eastern Europe and the ex-USSR. From 1997 to 2002, he was Manager of International Participations of the Crédit Agricole Group, and as such member of the Board of Directors of several banks in Europe and South America. From 2002 to 2009, he was European Affairs Adviser to Crédit Agricole S.A.'s senior management. Mr. Perron graduated from École Nationale d'Administration (ENA). Thérèse Sandmark Thérèse Sandmark joined the Grameen Crédit Agricole Microfinance Foundation in April 2011 as the team's agricultural micro-insurance officer. Before this, she was an independent micro-insurance consultant with a focus on the agricultural sector and social performance indicators. Prior to that, she was based in Nairobi for 2 1/2 years working as Programme Officer in microfinance and microinsurance covering the East Africa region for the Swedish Cooperative Centre. Thérèse holds a MSc in Business and Economics from the Stockholm School of Economics as well as Master in Microfinance from the European Microfinance Programme at the Solvay Business School in Brussels. El Hadji Ousmane Sy Sy El Hadji Ousmane holds a Masters Degree in Legal Sciences from the University of Dakar and a Degree in Insurance (DES-A) from the International Institute of Insurance IIA Yaounde Republic of Cameroon. Mr. Ousmane is the Controller of Insurance Commissioner / Office of Regulatory Studies and Training (BERF), since 2000 Insurance Branch of Senegal and is responsible for: • Monitoring the sector consolidation policy of insurance mediation • Management of the amenities of insurance intermediaries • Case tracking "studies" • Control of Insurance Companies He has also worked on the framework that is used by Senegalese General Insurance. Solveig Wanczeck Solveig Wanczeck works as project advisor in the GIZ-competence center Financial Systems Development based in Germany. She holds a master degree in development finance (M.Sc.) and is engaged in agricultural insurance matters and disaster risk management in the context of climate change. Her work mainly focuses on the new jointly-led project RIICE (Remote sensing-based Information and Insurance for Crops in Emerging economies). This project aims to reduce smallholder farmers' vulnerability by setting up a global rice information system and by developing insurance solutions based on remote sensing data. Field visit and training in Tamil – Nadul (India) August 2012 Patrick Warin Patrick Warin has a background in Life, Pension and Health insurance both with CNP Assurances (n°1 Life insurance provider in France) and with Allianz Group. He has been in charge of the Education and Training organization for the French insurance sector (IFPASS) until 2010. Now retired, Mr. Warin volunteers as Advisor to the chairman of the Micro Insurance International Institute for Research (MIIIR) funded in 2011 in France, in order to promote and organize studies, researches and projects in the field of Micro Insurance worldwide. Field visit and training in Tamil – Nadul (India) August 2012 Appendix 2 - List of Speakers Rupalee Ruchismita - Executive Director, CIRM Rupalee is the founding head of the Centre for Insurance and Risk Management (CIRM); a technical group, which provides micro insurance expertise to the sector. As a pass out of the Tata Institute of Social Sciences, she has worked with the Social Initiatives Group (SIG), a grant and research making group within ICICI Bank. Her work has been in the field of Financial Inclusion. She has also been involved in developing 'Catalytic Infrastructure' and is engaged in 'Policy Advocacy' in the microfinance sector to ensure sustainable development of the microfinance sector. She has worked in developing micro-health insurance products for community institutions. Ashutosh Shekhar - Agricultural Analyst, CIRM Ashutosh holds a Post-graduate diploma in Rural Management from Institute of Rural Management, Anand (IRMA) and graduate degree in Agricultural Sciences from Banaras Hindu University (BHU), Varanasi. Prior to joining CIRM, he has worked with Canara Bank as an Agricultural Extension Officer serving banking sector in rural areas for one and half years. His primary areas of interest include designing financial and integrated risk management tools for agricultural and livelihood risks. In his present capacity at CIRM, he is working on weather index insurance products and livestock insurance products AIC, public insurer: The Agricultural Insurance Company of India was founded in December 2002 and commenced business in 2003. Organisation Share Holdings (%) General Insurance Corporation of India 35.00 National Bank for Agriculture And Rural Development (NABARD) 30.00 National Insurance Company Limited 8.75 The New India Assurance Company Limited 8.75 Oriental Insurance Company Limited 8.75 United India Insurance Company Limited 8.75 AIC is the largest agro-insurance company in India providing area yield and weather based crop insurance in about 500 districts of India and covers almost 20 million farmers, making it one of the biggest crop insurers in the world. AIC is directly controlled by the Ministry of Finance, Government of India. The various products offered by AIC have been categorized as past, present and future products. Some of these products under all the three categories are mentioned below: For more information visit: www.aicofindia.com Field visit and training in Tamil – Nadul (India) August 2012 Mr. Kolli N. Rao - Chief Risk Officer, and Head of the 'Product Development' and 'Reinsurance' within Agriculture Insurance Company of India Ltd. (AIC). Mr. Rao is associated with agriculture insurance in the country for the past 25 years, and reviews undertaken by the Government of India since 1996. He has worked on various committees constituted to review crop insurance and he is an examiner with Insurance Institute of India since 1993, having revised course material on 'Agriculture Insurance' twice (2002 and 2010). Mr. Rao has spoken in various international conferences on agriculture insurance, and studied crop insurance programs across the world. He has published many technical papers and written articles on agriculture insurance and weather insurance. He also assisted the World Bank on a few assignments in the field of risk mitigation and has also helped the Food & Agriculture Organization (FAO), World Food Program (WFP) and International Research Institute for Climate & Society (IRI). His expertise is being used by a few African countries like Nigeria, Ghana to revive the crop insurance programmes. Karnataka State Natural Disaster Monitoring Centre Karnataka State has the distinction of being first in the country to establish Drought Monitoring Cell (DMC) in 1988 as an institutional mechanism to monitor the Drought. Activities broadened to also include monitoring other natural disasters and renamed as Karnataka State Natural Disaster Monitoring Centre (KSNDMC) in 2007. Natural Disasters Management heavily depends on inputs from Science and Technology. KSNDMC has been serving as a common platform to the various response players in the field of natural disaster management by providing timely proactive science and technology inputs. The Master Control Facility will strengthen the activities of the centre in providing information, reports, advisories to the community, research organizations and the Government. The Centre provides inputs to the farming community, agriculture and horticulture based sector, fisherman, transport sector, power and electricity sector, State and District level Disaster Management Authorities in Karnataka through state of the art natural hazards monitoring sensors, information and communication system. Mr. V Prakash - Director, Karnataka State Natural Disasters Monitoring Centre. Karnataka State Natural Disasters Monitoring Centre is an autonomous body affiliated with the Department of Science & Technology, Government of Karnataka, India He was trained as a post-graduate in earth sciences from Central College, Bangalore; Post-graduate in Exploration geophysics from Osmania University, Hyderabad and Post graduate in Water Resources with specialization in Remote Sensing and GIS from International Institute for Aerospace and Earth Sciences, the Netherlands. He has served in various capacities in Government of India and Government of Karnataka since 1973. His areas of specialization are: • Monitoring, alert recognition, early warning and preparedness for management of natural hazards • Risk management in natural disasters • Assessment, development and management of water resources with specialization in groundwater, and • Remote sensing and geographical information systems (GIS). Field visit and training in Tamil – Nadul (India) August 2012 ICICI Lombard, private insurer ICICI Lombard, a 74%-26% joint venture between ICICI Bank and Canada's Fairfax Financial Holdings Ltd., offers various weather and health microinsurance products in India. For reinsurance cover for the products the company is working with Swiss Re, Scor and Hanover Re for microinsurance development. ICICI Lombard introduced an index-based weather crop insurance product in 2003 and is now offering it in 14 states comprising 64 districts, covering 26 varieties of crops. For more information visit: http://insurancenewsnet.com/article.aspx?id=253104 Mr. Navin Sharma - Vice President – Health & Weather, ICICI Lombard GIC Limited. He has 14 years of corporate experience and has been with ICICI Lombard for the past 10 years. He has been associated with various underwriting function (property and casualty) before shifting to weather portfolio. ICICI Lombard is the dominant private sector insurer in weather based crop insurance and Mr. Sharma's efforts have been instrumental in the exponential growth of weather insurance portfolio of the company in recent years. IFFCO TOKIO, private insurer IFFCO-Tokio General Insurance Co. Ltd. is a joint venture between Indian Farmers Fertilizer Cooperative Ltd (IFFCO), formed by more than 40,000 farmers' cooperatives, and Tokio Marine and Nichido Fire Inc of Japan. ITGI serves the insurance needs of the economically underprivileged rural masses across India through 52 strategic business units and a network of over 293 offices. ITGI is experienced in designing and marketing livestock microinsurance distributed through farmer cooperatives and cooperative banks. IFFCO-Tokio have been implementing an index insurance for livestock insurance in India for over 6 years and are the third largest insurer after AIC and ICICI Lombard. They are grant recipients of the ILO Microinsurance Innovation Facility under which their project aims to test a model to reduce fraud by using an identification device placed under the hide of the animal (based on RFID technology - Radio Frequency Identification). The current means of identifying the insured animal is through ear tags, which can easily be lost or removed. By reducing fraudulent claims, the technology can benefit farmers through lower premiums to reflect the reduced claims. Additionally, the technology, used to store information about livestock such as vaccinations, can support the cooperatives and milk unions to improve herd management. The advent of more sustainable livestock insurance can also promote more product development, and invite other actors to enter the sector. For more information visit: www.iffcotokio.co.in Mr. K. Gopinath - Head of Rural and Co-operatives at IFFCO TOKIO General Insurance (ITGI) His responsibilities include developing rural markets for IFFCO TOKIO in terms of identifying demand for insurance products, designing new products and delivery processes and monitoring its marketing and profitability for long term growth. Gopinath is a winner of ILO innovation grant for a project on cattle insurance titled "Loss mitigation in cattle insurance through RFID technology." He has more than 24 yrs experience in Insurance industry with extensive experience in Claims, underwriting and marketing. He holds a Bachelor in Commerce (with Honours) and is also a Fellow of Insurance Institute of India. Field visit and training in Tamil – Nadul (India) August 2012 HDFC ERGO General Insurance Company Limited, private insurer HDFC ERGO General Insurance Company Limited is a joint venture between HDFC Limited, India's premier Housing Finance Institution, and ERGO International AG, the primary insurance entity of Munich Re Group. HDFC ERGO offers complete range of non-life insurance products ranging from Motor, Health, Travel, Home and Personal Accident in the retail space and customized products like Property, Marine and Liability Insurance in the corporate space. HDFC ERGO is the 4th largest private sector general insurance company in India as rated by IRDA and it has acquired second position among private insurers in underwriting weather insurance policies. HDFC ERGO has been expanding its presence across the country and is today present across 71 cities with 80 branch offices with an employee base more than 1107 professionals. The company has a wide distribution network comprising of brokers, retail and corporate agents, bank insurance besides its own direct sales force. HDFC ERGO has been assigned the rating of “iAAA” by ICRA indicating its highest claim paying ability. The company also has ISO certification for its claim services. Azad Mishra - Product Manager, HDFC Ergo National Bank for Agriculture and Rural Development – NABARD NABARD is set up as an apex Development Bank with a mandate for facilitating credit flow for promotion and development of agriculture, small-scale industries, cottage and village industries, handicrafts and other rural crafts. It also has the mandate to support all other allied economic activities in rural areas, promote integrated and sustainable rural development and secure prosperity of rural areas. In discharging its role as a facilitator for rural prosperity NABARD is entrusted with providing refinance to lending institutions in rural areas, bringing about or promoting institutional development and evaluating, monitoring and inspecting the client banks. For more information visit: www.nabard.org R Sundar - General Manager, National Bank for Agriculture and Rural Development (NABARD) at the Tamil Nadu Regional Office, Chennai He leads the teams responsible for Short Term Refinance to Cooperative and Regional Rural Banks, Farm(ers) Development and Innovation interventions, Natural Resources Management, Financing the State Government for Rural Infrastructure and NABARD Consultancy Services. Previously he was the Head of Tripura Regional Office of NABARD. He has also been a Faculty Member in the NABARD Staff College, Lucknow and has been with NABARD for 25 years. Furthermore, Mr R. Sundar has also served with the National Dairy Development Board and the National Cooperative Dairy Federation of India. He holds a Post Graduate Degree in Mathematics (BITS, Pilani) and a Post Graduate Diploma in Rural Management (IRMA). Field visit and training in Tamil – Nadul (India) August 2012 Coastal Salinity Prevention Cell Coastal Salinity Prevention Cell (CSPC) has been visualized as a fulcrum to develop and strengthen various initiatives of government and civil society organizations, aimed at addressing the issue of salinity. Salinity is multi-sectarian and complex in nature, demanding systematic response. Considering the complexity and the multi faceted nature of salinity problem, substantial impact was felt necessary, wherein joint efforts of both, government and civil society organizations are required. This possibly could be done through an umbrella organization in the form of CSPC. This resulted from a dialogue process between civil society organizations and other partner NGOs, Sir Ratan Tata Trust and the Government of Gujarat, which issued a circular on April 12, 2004, constituting the CSPC and its State level Steering Committee headed by Secretary Water Resources, Government of Gujarat. Natu Macwana - head of Coastal Salinity Prevention Cell (CSPC) CSPC is an organisation initiated by Sir Ratan Tata Trust, Agakhan Rural Support Programme and Ambuja Cement Foundation in Gujarat. He started his professional carrier with drinking water and sanitation movement that promoted decentralised drinking water harvesting system in Gujarat with a network of NGOs named PRAVAH in 2002. He was also a senior consultant for Chief Minister's Ten point programme being executed by Gujarat Tribal Development Department. Mr. Macwana provided leadership to Sajjata Sangh - a Network of 35 leading NGOs of Gujarat working on Natural Resource Management (NRM) for four years for its rainfall insurance programme that has expanded to more than 14 times, in terms of farmer enrolment, within two Kharif seasons. He has also pursued fundraising with NABARD to ensure financial support to the programme for three years starting from Kharif 2010. He holds a Bachelor's in Business Administration and a Masters in Social work. Field visit and training in Tamil – Nadul (India) August 2012 Appendix 3 - Participant Views Day One Dr. Georges Abbey: Lecturer, University of Lome “The objectives of the workshop are very wellaligned with our expectations and allows for everyone to discover some important lessons. The guest speakers are well in tune with their topics and we wish they had more time to share their experiences. In Africa, we are taking our very first steps in agricultural index insurance and we need to better understand the challenges the Indian practitioners encountered and how they overcame those obstacles so that we do not repeat their mistakes. Today, the speakers also underlined the importance of constant innovation in order to reduce transaction costs and increase client value.” Pacome Bonou: Head, AMAB Production Service (Agricultural Mutual Insurance of Benin) “This first day we learnt about the behaviour one needs to have when starting an index agricultural insurance venture and the role farmers play at this stage. The speakers also stated that making payouts the first season can be a powerful demonstration effect and improve take up for the next season.” Fabrice Larue: Project Manager, Foundation for World Agriculture and Rurality (FARM), Paris. One of the things that struck me the most today was that the speakers were really passionate about their topics and managed to transmit their enthusiasm to the participants. It also stood out that for the establishment of a successful index agricultural insurance the key technical issues have been very advanced (i.e. issues relating to infrastructure) but despite that, there are other decisions that are more difficult like choosing between a simpler product or a more complex product that might better reflect the farmers’ actual loss. We knew that we were coming to one of the leading countries in this field, but I discovered today that research was conducted in the area of index agricultural insurance since the 1920′s in India and the current leadership stems from a long term interest and studying of the topic. Day Two Sessimè Martine Dahoun: Head of Regulation – Insurance Department, Ministry of Finance, Benin. It is a very good day for me because the translation was very fluid and I was able to engage in the discussions. limited to agriculture. There are also other products that are yet to be discovered in this area. As a regulator, I realised today that the insurance sector is not static and is in a constant movement and we need to adapt to this reality. Everything we learnt today was practical. I learnt today that the Weather Index Insurance is not Also as a regulator, we can’t just wait for the product to appear, we have to be the part of the movement in creating the product. Hellen Olima: Insurance Officer and Commissioner, Insurance Regulatory Authority (IRA), Kenya Department, Regulators and the Customers in designing the product. Because of this, by the time the pricing is done, the customer (i.e. farmers) understand it all. It is interesting for me to see the collaboration that happens between the Indian Meteorological Field visit and training in Tamil – Nadul (India) August 2012 One of the problems we have is that the insurance companies don’t really talk to the customer and hence the customers don’t really understand the product. I understand that it is a long process to include the customer in designing the product, but in the longer run, it creates a value chain for customers and insurers. Vusala Garayeva: Network Coordinator, Azerbaijan Micro-finance Association (AMFA) I would like to see how Index Insurance works, specifically pays out, how the whole system works and how it all integrates into the agriculture value chain. I got a general overview and I am looking forward to the field visit to find out how it works in the real world. From the Field Visit Constance Collin: University of Rennes It was great to discuss directly with the farmers and to hear their opinions. During the discussions we discovered many of the practical issues that the farmers face were not always covered in the classroom sessions. It was also very insightful to see the context in which these policies are sold. They are also excellent hosts and very welcoming. Jimmy Loro: Senior Adviser, GIZ. For me, one of the key elements of a good insurance product is that it is understood at the farmers’ level. Explaining rainfall levels to smallholder farmers was a challenge. This group bought their first insurance in 2006 and even after 6 years, they still haven’t fully understood the trigger and payout calculations. There is a need for more financial and technical training on the product for farmers. The presence of extreme weather events like drought resulted to higher demand for crop insurance. I also noted that the weather data provision and the insurance companies are very closely linked. In the Philippines, we would have seen this as a risk as we put great importance on separating these two actors in order to ensure that the data is reliable and objective. Oscar Chamale: Business Director: Aseguradora Rural (Banrural Financial Group S.A) It’s very much integrated with their other activities and hence becomes a part of the value chain. I was surprised by the involvement of the farmer organisation in the management of the product and they were even responsible for the claims process. In Guatemala, I have not yet seen any farmer organisation take on this role. Here the farmers have a lot of trust in their organisations which is why they buy the insurance. Momath NDAO: Controller of Insurance Commissioner – Department of Insurance (MEF), Senegal The farmers are the key actors at every step of delivering agricultural insurance and need to be involved at each step. The farmer organisation that we met played an important role in highlighting the obstacles of being an intermediary between the farmers and the insurance company. We need to listen to the farmers as they are always smarter than us. They know what they want and what is good for them, just like the Senegalese farmers. And they are also very hosts!