Conference on New Directions for Smallholder Agriculture Nahu-Senaye Araya, CEO, Nyala Insurances The Ethiopian Experience On Micro Insurance Session 5, Breakout Session 11 NYALA INSURANCE S.C. PRESENTATION HEADINGS: I. PROFILE: Country & Financial Institutions II. NYALA’S EXPERIENCE A. MPCI B. WICI III. LEASON LEARNT IV. RECOMMENDATION V. CONTACTS W e A.PROFILE NYALA INSURANCE S.C. 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 W 3 e NYALA INSURANCE S.C. A2. PROFILE FINANCIAL INSTITUTIONS & NYALA’S No. of Commercial Banks: 14 (3 Gov’t. 11 PVT.). No. of Micro Finance: 30 No. of Insurance Companies: 12 (1 Gov’t + 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 4 e NYALA INSURANCE S.C. II. NYALA’S EXPERIENCE DELIVERY CHANNEL INSURER CLAIM SETTLEMENT CLAIMANT PAYMENT STATEMENT CO-OPS/ UNION FARMER UNDERWRITING CO-OPS/ UNION FARMER POLICY HOLDER CERTIFICATE HOLDER W 5 e NYALA INSURANCE S.C. B. NYALA’S EXPERIENCE: 2007 TO DATE:B1. Multiperil Crop Insurance (MPCI) – Crop Yield, Flood, etc Year Regi on No. Household Crop Type Total Ha Sum insured Premium Rate Ave. ‘000s‘B ‘000s Birr % irr 2007 Oro mia 120 Whe 246.16 at, Teff, HB 2.05 664 31, 4.71 2008 Oro mia“ 827 0.94 3,076, 145 4.71 2009 Oro mia“ 676 Whe 777.83 at, Teff, HB Whe 317.42 at, Teff, CP Claim ‘000s Birr Nil Techn Ratio ical % Suppo rt - 63.1 Nyala Cover s+ Swiss Re “ 91 0.47 3,372, 179 5.31 - “ No W e B2 . WEATHER INDEX CROP INSURANCE (WICI) – COVERS DROUGHT ONLY) Region NYALA INSURANCE S.C. Year No. Household Crop Oromia 137 Haricot Bean Tigrai 200 Teff 2009 Tigray Teff, 1,309 Wheat/ Oromia 290 Amhara 32 SNNPR 452 2010 Total 2,420 Barely, Maize Sorghu m, & Teff Total Ha Average HA/HH 159.75 1.17 Sum insured’000s Birr Premium ‘000s Birr Rate % 639 73 11.50 0.11 115 28 23.90 147.05 0.11 974 208.00 0.72 Claim “000s Birr Ratio % Support 420.6 WFP Nil Nil OXFA M A. 357 36.64 Nil Nil OXFA M A. 418 83 19.96 Nil Nil IFPRI 0.40 26 3 10.20 Nil Nil IFPRI 199.18 0.44 396 73 18.57 Nil Nil IFPRI 447.7 0.31 2,567 617 20.13 309 50.10 21.0 12.75 309 - W e NYALA INSURANCE S.C. B3. COMBINED MPCI & WICI- 2007 TO 2010 Household Total HA Average HA/HH Sum Premium Insured ‘000S Birr “000s Birr 4,043 2,089.14 0.52 9,680 Rate % Claim ‘000S Birr Ratio % Support WFP, 973 6.38 401 41.2 OXFA M& IFPRI W e NYALA INSURANCE 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 LESSONS LEARNT NYALA INSURANCE S.C. 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. NYALA INSURANCE S.C. Cont. Draw Backs - Lack of awareness - Affordability of premium - Questions insurers’ motive Insurance products so far introduced not fully meet their needs ( Livestock/Health/Life ? ) NYALA INSURANCE 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/Gov’t Dev. Agents NYALA INSURANCE 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 - MF’s credit collection more or less enforcable by government Development Agents not being used as financial educators of farmers NYALA INSURANCE 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 NYALA INSURANCE S.C. IV. RECOMMENDATION ( Ethiopian context ) TO BE ENHANCED AND OR INTRODUCED BY THE MAJOR PLAYERS) NYALA INSURANCE S.C. A1. ALL MAJOR PLAYERS (Government, Insurers, Donors, and Banks) STEP UP CUSTOMER’S 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 NYALA INSURANCE 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 GOV’T DEVELOPMENT AGENTS AS FIELD FINANCIAL TRAINERS AS WELL INCORPORATE MI AND MF ACTIVITIES IN THE FOOD SECURITY STRATEGY NYALA INSURANCE 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. NYALA INSURANCE S.C. A4. COMMERCIAL INSURERS: ALWAYS WORK WITH RELIABLE REINSURANCE 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 NYALA INSURANCE 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. NYALA INSURANCE S.C. V. CONTACTS: FOR INFORMATIONAND OR ASSISTANCE ON MICRO INSURANCE IN ETHIOPIA MR. EYOB MEHERETTE CEO, NYALA INSURANCE S.C. EMAIL: eyobm@nyalainsurance.com eyobm@nyalainsurancesc.com TEL: + 251 911 20 73 91 FAX: + 251 116 62 67 06 NYALA INSURANCE S.C. FOR COMMENTS/QUERRIES ON WHAT HAS BEEN PRESENTED HERE NAHU-SENAYE ARAYA ADVISOR/CONSULTANT EMAIL: yesucan.letustalk@gmail.com TEL: +251 911 20 73 89 FAX + 251 116 62 67 06 NYALA INSURANCE S.C. PLEASE CONTINUE HELPING THE POOR FARMERS THANK YOU