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Flood damage insurance payout gins up interest in microinsurance says RADA

Winston Simpson, CEO of the Rural Agricultural Development Authority, RADA, says farmers who at first were sceptical about crop insurance have become more bullish since the recent rains after the payments arrived from their insurer covering damage sustained from the flood.

The worst-hit areas from the tropical cyclone included Kingston, St Andrew, St Catherine, and St Thomas, according to the the Ministry of Agriculture, Fisheries and Mining.

A total of 410 hectares of crops, including vegetables, fruits, and condiments were said to be lost. Livestock losses included 160,500 broilers, 1,460 layers, 70 pigs, 34 sheep, and 47 goats.

There has also been significant impact on infrastructure and irrigation systems on which farmers depend.

“Since the payout has started, I have been getting a lot of calls from farmers saying they have been left out. We tell them to sign up and get on board,” Simpson said in an interview on December 19. “Insurance, like many other things, has to get buy-in,” he added.

The microinsurance product for farmers is offered by GK General Insurance, he said.

The insurer made payments to 27 farmers for the November rains, amounting to $875,000, said General Manager of GK General Insurance Chaluk Richards.

It represented a fragment of the agricultural fallout, which Minister of Agriculture Floyd Green put at $274 million.

In its assessment of the November rains, the Ministry of Agriculture indicated that crop losses amounted to approximately $173 million, impacting over 2,000 farmers.

Livestock losses were estimated at $26 million, affecting 550 farmers, while infrastructure damage was $64 million.

The GK microinsurance policy is offered in partnership with the agriculture ministry of which RADA is a portfolio agency.

First came the packaging of the insurance product.

“The one that presented the best package did it by ecological zones and weather patterns. Coverage was offered for drought, flooding, and hurricane,” said Simpson.

The Ministry of Agriculture paid a part of the premium for the farmers who signed up, he added. The farmers have access to coverage for drought and flooding, depending on the package purchased.

“There is a new energy, a new level of interest,” said Simpson.

“I expect to see more farmers signing up in 2024. It is a plus for farming. Most of the larger investors who understand risk are also seeking insurance as something they need. Depending on the package, there can be a million dollars in coverage,” he added.

GK General said the farmers who received insurance payouts under its GK Weather Protect parametric policy spanned the parishes of Clarendon, Manchester, and St Elizabeth.

“Our focus extends to the 231,000 registered farmers with RADA as well as reaching out to other farmers nationwide,” said Richards. The company is targeting “the entire farming community” with the product, he added.

Payouts under the policy are based on a weather index – that is, excess rainfall and high wind speed measured in each parish – and once a trigger value is reached, payment is triggered automatically,” said Richards.

Farmers and fishers can choose coverage for individual perils – rainfall, drought, or hurricane winds – or combine them for comprehensive protection. Payouts are based on pre-defined weather data, eliminating the need for loss assessments. As such, payouts tend to be speedier than for non-parametric insurance coverage.

GK Weather Protect is said to have customisable limits with coverage options ranging from $50,000 to $1 million. And policies are offered for two distinct seasons, allowing for targeted protection based on need and local weather patterns.

For rainfall and or drought coverage, the minimum premium is $3,000 up to a maximum of $60,000 for the million-dollar policy per season.

Hurricane wind coverage starts at $2,160, with a maximum premium of $43,200 per season. The coverage limit is $50,000.

The GK insurance product was launched in 2021, but sign-ups began in 2022. Some 817 farmers were onboarded, and an additional 154 farmers were added to coverage in 2023. Coverage is underwritten by GKGI, Richards said.

Simpson said the frequency of weather events does not mean automatic payment. Instead, the scale of the weather event is the determinant.

“In terms of flooding, there needs to be a certain number of days of flooding. There are also different kinds of drought that have become critical. A dry spell may not be an agricultural drought,” he explained.

The RADA CEO says he expects other insurers to enter the market with more products geared at the agriculture sector, adding that companies have been calling “from as far away as Europe” to get information on the market. There are 250,000 registered farmers, he added.

Already, home-based Advantage General Insurance Company has developed a product covering cars, equipment, vessels, and accessories for fisherfolk. And Sagicor Life Jamaica has produced a life coverage microinsurance line for farmers.

“It is a big market. The numbers may have grown,” he added, while noting that COVID had spawned a new wave of entrepreneurs amid a heavy fall-out in the jobs market.

“Everybody got into a self-reliance mode,” he said.

To qualify for relief or incentives as a farmer, the person must have access to land, whether tenure by ownership, or lease, or family holdings. The land being farmed must be five acres or more under production in order to access product input, motor vehicle or tax incentive relief.

“There are those who come on board to do backyard farming, including retired bankers, and others trying to live healthy. We do assist them, but they will not be registered as producers,” said Simpson. “They would not benefit for incentives.”

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