IFC, a member of the World Bank Group, and PT Reasuransi MAIPARK have agreed to jointly develop index-based insurance products to hedge risks against adverse weather events for agribusinesses, bank agriculture-loan portfolios, and farmer groups.
In a statement, IFC says that will support MAIPARK—a special-risk reinsurance company—to work with local insurance companies to develop, sell, and possibly bundle these new products with agri-loans or inputs to mitigate these weather-related risks.
The new insurance products intend to protect farmers, agribusinesses, and banks—and also attract further investment by reducing the risks associated with natural hazards and adverse weather events.
Indonesia is highly vulnerable to a variety of climate hazards, including droughts, floods, landslides, and rising sea levels. The impacts and effects of adverse weather events—such as droughts, floods, and hurricanes—were felt during the most recent El Nino, when some of the worst hit agribusinesses reported up to 30% drops in projected yields.
“The national programme to achieve food security and improve people's productivity will need to be supported by all parties,” said Yasril Y Rasyid, President Director of MAIPARK. “The insurance industry can support the programme by providing protection against risks faced by agricultural stakeholders. Our cooperation with IFC allows us to innovate with parametric insurance products for agriculture.”
Mr Azam Khan, IFC’s Country Manager for Indonesia and Malaysia, said: “The region’s changing climate reality has made insurance essential to protect local businesses and strengthen industries so they become resilient to climate change.
“This project reinforces our commitment to create new markets and fully support sustainable growth by providing protection to all key players in the agriculture value chain.”
The joint project with MAIPARK is part of IFC’s Canada-funded Indonesia Agribusiness Programme, which aims to promote inclusive and sustainable rural growth.
MAIPARK is a special-risk reinsurance company owned by all licensed general insurance and reinsurance companies in Indonesia. MAIPARK has been operating since 1 January 2004, providing reinsurance cover for earthquake, volcanic eruption, and tsunami risks.
IFC is the largest global development institution focused on the private sector in emerging markets.