Insurance cover will make farmers work harder

News of parametric insurance for farmers and rural dwellers to cover losses caused by natural disasters should be exciting news. The move is spearheaded by the Reserve Bank of Fiji, which will have talks with the International Monetary Fund, World Bank and iTaukei Land Trust Board to see this well thoughtout initiative become reality.

Parametric insurance described as a type of insurance that does not indemnify the pure loss, but ex ante agrees to make a payment upon the occurrence of a triggering event.

The triggering event is often a catastrophic natural event which may ordinarily precipitate a loss or a series of losses.

But parametric insurance principles are also applied to agricultural crop insurance and other normal risks not of the nature of disaster, if the outcome of the risk is correlated to a parameter or an index of parameters.

Parametric insurance products are not new and have been developed rapidly around the world. They’ve been described by global law firm Clyde & Co as “an elegant solution for risk-transfer concerns” and are lauded as attractive alternatives and enhancements to some traditional insurance policies. Parametric insurance is gaining ground, especially for weather-related events like cyclones.

This forward momentum stems from the improvement of advance technology in relations to predicting weather with weather stations and satellites capturing more accurately weather-related parameters. This in turn gives out more accurate and improved data and which allows parametric cover as an increasingly viable option in the market.

Our farmers, both in canefarming and others in the agriculture sector have, for years, suffered substantial losses following disasters, whether it be cyclones or floods.

Their cries were heard, but really nothing was being done until the FijiFirst Government took over. The Government had always been by their side as they began the long recuperating period following disasters.

Prior to that, the farmers received little to nothing and most ended up taking extra loans from banks and financial institutions like the Sugar Cane Growers Fund and Fiji Development Bank to get their lives back in order.

While this eased their pain it prolonged their suffering as those loans had to be paid back with interest. RBF Governor Ariff Ali said the parametric insurance covered areas affected by cyclones up to category three and there was scope for the insurance to also cover hotel workers and land owners.

Mr Ariff noted that agriculture insurance could also be introduced. This would ensure the premiums recycle back into the economy as investment capital. This will make the farmers work harder to produce bigger crops knowing it will be covered by insurance should a cyclone hit the country.

He said this would play a significant role as the premiums would recycle back into the economy as investment capital.

But the bottom line is that it will make the farmers work harder to produce bigger crops knowing that it would be covered by insurance should a cyclone hit the country. ■