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January 30, 2010

Agricultural insurance launched in Botswana

by Brain Benza

Agriculture insurance has finally been launched for the first time in Botswana with the facilitation of the Agricultural Hub, as the sector tries to move towards full commercialisation.
Agrinsure Botswana, a joint venture effort between South Africa's Farmers Technical Insurance Services Company (FTISC) and Alexandra Forbes Botswana, was recently officially unveiled to stakeholders in the industry.

According to Agriculture Hub Coordinator, Neil Fitt, the establishment of agriculture insurance in Botswana is a major milestone in the sector as the idea for such a product has been in the pipeline for many years  and it will now  strengthen  the country's efforts to attain food sustainability.

"In the past we have only had schemes that were put in place by government and in as much as they were very helpful to the farmers, they had their own limitations as they were national programmes. With the introduction of Agrinsure, we will now have products that are farm and individual specific. This will also go a long way in assisting farmers that were in need of such products as we know that banks here are not that excited about the farming business," said Fitt.

The company will be the first to offer agricultural insurance products in Botswana covering both livestock and crops.

The Agriculture hub Coordinator says that the Agrinsure project is purely a commercial venture with no government involvement except only to sanctify the venture.

Fitt added that they were forced to go and solicit for the services of the South African company after local companies were either uninterested in agriculture insurance or inexperienced to offer the service.

CEO of Agrinsure David Garden says they are now in the process of winding up registration of the company with the licence from the Non-Banking Financial  Institutions Regulatory Authority(NBFIRA) expected soon.

Asked to comment on the chances of finding underwriters in a market where the financial institutions are not very keen on agriculture insurance, Garden said,  " we are hoping a few financial institutions will come on board but some of the business will have to be taken abroad. Alexandra Forbes will have the task of looking for the underwriters but this is still a new product in a relatively small market and I believe we are going to have to take a significant amount of the business outside the country. In South Africa most of our business comes from Standard Chartered bank and we are hoping they are going to be one of the first to do business with us here in Botswana. I understand they have already sent a representative from South Africa to look into this matter," said Garden.

Reinsurance support for the direct insurer is expected to be provided by Munich Re, the largest reinsurer in Africa while local technical support will be done by Agrinsure.

Garden further said they have crafted a number of products which will suit different farmers for both livestock and crops. "For the first time in Botswana multiperil insurance will be available for herd animals at affordable premium with the introduction of Herd Select Insurance. The Farmer can select the animals he wishes to insure if he does not want to insure his entire herd. Effecting this Insurance will also assist the farmer to obtain finance to purchase animals" he said.

Rates will be based on the number of animals insured and the self-insurance option chosen, usually 10 percent.

Garden added that the insurance is designed to protect the least valuable animals, or the entire herd where the farmer is not concerned about disease or sickness cover, with the cover options including death from fire, lightning, accident and theft.

On crops, the cover provided will be based on a guaranteed yield which is determined by the production history (potential yield) and calculated at an agreed value per tonne.

Perils that may be covered are fire, lightning, frost, excessive rain, drought including excessive heat waves, uncontrollable crop diseases and pests and transit within a 100km radius. The basis rate for this insurance is five percent.


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