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Conference on New Directions for Smallholder Agriculture Nahu-Senaye Araya, CEO, Nyala Insurances The Ethiopian Experience On Micro Insurance Session 5,

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Presentation on theme: "Conference on New Directions for Smallholder Agriculture Nahu-Senaye Araya, CEO, Nyala Insurances The Ethiopian Experience On Micro Insurance Session 5,"— Presentation transcript:

1 Conference on New Directions for Smallholder Agriculture Nahu-Senaye Araya, CEO, Nyala Insurances The Ethiopian Experience On Micro Insurance Session 5, Breakout Session 11

2 N YALA I NSURANCE S.C. W e Ca re W e Pr ote ct PRESENTATION HEADINGS: I. PROFILE: Country & Financial Institutions II. NYALAS EXPERIENCE A. MPCI B. WICI III. LEASON LEARNT IV. RECOMMENDATION V. CONTACTS

3 N YALA I NSURANCE S.C. W e Ca re W e Pr ote ct 3 A.PROFILE A1. COUNTRY PROFILE Population: 85 mln. (UN 2010) – 83% Rural Area:1.13 mln. Sq. kms. Life Expectancy: 56 years (Male) 59 years (Female) GNP per capita: US $ 330 (WB 2009) Main Export:Coffee, Hides, Oil Seeds, Flower Main Food Crops: Wheat, Barley, Maize, Teff Gov. Dev. Agents on Food Crops: 67,000

4 N YALA I NSURANCE S.C. A2. PROFILE FINANCIAL INSTITUTIONS & NYALAS No. of Commercial Banks: 14 (3 Govt. 11 PVT.). No. of Micro Finance: 30 No. of Insurance Companies: 12 (1 Govt + 11 Pvt) Only one in Micro Insurance: Nyala Nyala Insurance: - Small sized company - Turnover:About US 10.0ml. - Manpower:270 - Activities:General, life and Micro Insurance (Crop, Livestock, Life) W e Ca re W e Pr ote ct 4

5 N YALA I NSURANCE S.C. II. NYALAS EXPERIENCE DELIVERY CHANNEL W e Ca re W e Pr ote ct 5 INSURER CLAIM SETTLEMENT UNDERWRITING CO-OPS/ UNION FARMER PAYMENT STATEMENT POLICY HOLDER CERTIFICATE HOLDER CLAIMANT

6 N YALA I NSURANCE S.C. W e Ca re W e Pr ote ct Year Regi on No. Household Crop Type Total Ha Ave. Sum insured 000sB irr Premium 000s Birr Rate % Claim 000s Birr Ratio % Techn ical Suppo rt 2007Oro mia 120Whe at, Teff, HB ,4.71Nil-Nyala Cover s + Swiss Re 2008Oro mia 827Whe at, Teff, HB ,076, Oro mia 676Whe at, Teff, CP ,372, No - Tot ,6231, , B. NYALAS EXPERIENCE: 2007 TO DATE:- B1. Multiperil Crop Insurance (MPCI) – Crop Yield, Flood, etc

7 N YALA I NSURANCE S.C. W e Ca re W e Pr ote ct YearRegion No. Household CropTotal Ha Average HA/HH Sum insured000s Birr Premium 000s Birr Rate % Claim 000s Birr Ratio %Support 2009 Oromia137 Haricot Bean WFP Tigrai200Teff Nil OXFA M A Tigray1,309 Teff, Wheat/ Nil OXFA M A. Oromia290 Barely, Maize Nil IFPRI Amhara32 Sorghu m, & Nil IFPRI SNNPR452Teff Nil IFPRI Total2, , B2. WEATHER INDEX CROP INSURANCE (WICI) – COVERS DROUGHT ONLY)

8 N YALA I NSURANCE S.C. W e Ca re W e Pr ote ct HouseholdTotal HA Average HA/HH Sum Insured 000s Birr Premium 000S Birr Rate % Claim 000S Birr Ratio % Support 4,043 2, , WFP, OXFA M & IFPRI B3. COMBINED MPCI & WICI TO 2010

9 N YALA I NSURANCE S.C. B3. Associates: Financial & Technical Assistance (Past & Future) National: Commercial Banks (Dashen Bank) Association of Micro Finance Micro Finance National Metrology Authority Ministry of Agriculture Co-ops & Unions International: IFPRI, FAO, OXFAM AMERICA, ILO, WB, SWISS-RE

10 N YALA I NSURANCE S.C. LESSONS LEARNT A1. FARMERS SIDE Farmers with no expectation show great interest - Minimize the mental & physical pressure coming from Creditors - Use of Insurance policy as collateral improves their bankability - Improve their negotiating power with Creditors Cooperatives/Union willing & capable to act as policy holders on their members behalf.

11 N YALA I NSURANCE S.C. Draw Backs - Lack of awareness - Affordability of premium - Questions insurers motive Insurance products so far introduced not fully meet their needs ( Livestock/Health/Life ? ) Cont.

12 N YALA I NSURANCE S.C. A2. INSURERS SIDE Lack adequate/reliable data to ensure quantity product design/costing Costing not actuarian derived - Unknown risks entail high premium - Major & reliable re-insurers show little or no interest Have low human & infrastructure capacity - Inadequate field visits - Minimal training to own staff & farmers/union officials/Govt Dev. Agents

13 N YALA I NSURANCE S.C. A3. GOVERNMENT SIDE No. Regulation for Micro Insurance yet MI & MF activities not integrated in the food security strategy Created uneven competitive ground for financial players. - MF income tax exempted - MFs credit collection more or less enforcable by government Development Agents not being used as financial educators of farmers

14 N YALA I NSURANCE S.C. D. DONOR'S Side Spend too much time and money on pre studies/research Obssesed with paper work Give less emphasis on human & infrastructure capacity building Promote short term year- to- year programe. Need to revisit capability & acceptabilty of their staff

15 N YALA I NSURANCE S.C. IV. RECOMMENDATION ( Ethiopian context ) TO BE ENHANCED AND OR INTRODUCED BY THE MAJOR PLAYERS)

16 N YALA I NSURANCE S.C. A1. ALL MAJOR PLAYERS (Government, Insurers, Donors, and Banks) STEP UP CUSTOMERS EDUCATION AND TRAINING MAKE THE LIVELYHOOD OF THE FARMER THE FOCAL POINT FOR ALL MI AND MF PROGRAMES HELP THE FARMER FROM THE MENTAL AND PHYSICAL PRESSURE COMING FROM THE MF AND INPUT SUPLIERS. FORCED TO PAY HIGH INTEREST RATE (OVER 2.5 TIMES COMMERCIAL RATE) FORCED TO JOIN THE G5 LOAN GUARANTEE SYSTEM

17 N YALA I NSURANCE S.C. A2. GOVERNMENT: INTRODUCE LEGAL FRAMEWORK FOR MICRO INSURANCE LEGALIZE COMMERCIAL BANKS AND INSURERS TO INCLUDE MI AND MF BUSINESS IN THEIR PORTFOLIO CREAT LEVEL GROUND FOR ALL PLAYERS TO AVTIVELY INVOLVE IN MI AND MF AREA. USE GOVT DEVELOPMENT AGENTS AS FIELD FINANCIAL TRAINERS AS WELL INCORPORATE MI AND MF ACTIVITIES IN THE FOOD SECURITY STRATEGY

18 N YALA I NSURANCE S.C. A3. INTERNATIONAL DONORS: MINIMIZE THE TIME AND MONEY SPENT ON PRE STUDY/RESEARCH. CONSIDER A 3 TO 5 YEAR PROGRM (NOT YEAR 2 YEAR) WITH DIMINISHING SUBSIDY AMONT TO FARMERS OVER THE PERIOD GIVE PRIORITY TO THE DEVELOPMENT OF STAFF OF INSURES/UNIONS/MF. REVISIT THE CAPABILITY/ACCEPTABILITY OF OWN STAFF/CONSULTANTS.

19 N YALA I NSURANCE S.C. A4. COMMERCIAL INSURERS: ALWAYS WORK WITH RELIABLE RE- INSURANCE USE CO OPS/UNIONS AS DELIVERY CHANNELS AND OR AGENTS MAKE THE MI POLICY SIMPLE AND UNDERSTANDABLE. SETTLE OR REPUDIATE CLAIMS AS SOON AS POSSIBLE INCLUDE MI AND MF ACTIVITIES IN THEIR BUSINESS AND INTRODUCE A MINUMUM %AGE OF MI AND MF BUSINESS IN THEIR PORTFOLIO INTRODUCE ALWAYS HIGH QUALITY PRODUCT DESIGN AND RISK RELATED PREMUIUM

20 N YALA I NSURANCE S.C. A5. COMMERCIAL BANKS AND CREDITORS: ACCEPT POLICY FROM REPUTABLE INSURER AS LOAN COLLATERAL TAKE THE BUSINESS AS SOCIAL CONTRIBUTION AND OR IMAGE BUILDING IN THE SHORT TERM WITH THE VIEW OF ITS LONG TERM BUSINESS POTENTIAL AND PROFITABILITY.

21 N YALA I NSURANCE S.C. V.CONTACTS: FOR INFORMATIONAND OR ASSISTANCE ON MICRO INSURANCE IN ETHIOPIA MR. EYOB MEHERETTE CEO, NYALA INSURANCE S.C. TEL: FAX:

22 N YALA I NSURANCE S.C. FOR COMMENTS/QUERRIES ON WHAT HAS BEEN PRESENTED HERE NAHU-SENAYE ARAYA ADVISOR/CONSULTANT TEL: FAX

23 N YALA I NSURANCE S.C. PLEASE CONTINUE HELPING THE POOR FARMERS THANK YOU


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