News Non-Life11 Jun 2024

Pakistan:Regulator highlights crucial need for agricultural insurance

| 11 Jun 2024

The Securities and Exchange Commission of Pakistan (SECP) has stressed the crucial need for agricultural insurance in Pakistan which currently accounts for only 2% of the total non-life sector premiums.

In a report titled “Securing Livelihoods: A Comprehensive Look at Crop and Livestock Insurance in Pakistan and the Way Forward’’, the SECP underscored the central role of Pakistan's agriculture sector in the economy, which accounts for 23% of the GDP, with 63% of this share generated from livestock. However, this sector faces significant risks including climate change, floods, droughts, pests, diseases and high input costs.

Pakistan's agricultural insurance landscape remains underdeveloped. At present, government-led insurance schemes cover approximately 14% of farmers, necessitating substantial expansion and enhancement.

There are challenges, both on the demand and supply sides, that hinder the growth of agricultural insurance in Pakistan which includes the limited capacity of the insurance industry of Pakistan to cover substantial losses in the agriculture sector and the absence of robust data necessary for risk measurement by insurers. A pervasive lack of insurance culture among farmers, driven by perceptions of non-viability and non-affordability, further stifles demand.

Pools

To address these issues, the report recommended reassessing current schemes and establishing insurance pools or consortiums to consolidate risks, making agricultural insurance financially viable for insurers and economically feasible for farmers.

A mandatory national crop insurance initiative and a nationwide livestock insurance programme with graduated subsidies for subsistence farmers were also suggested.

Integration of crop and livestock insurance into social protection initiatives of the government and incorporation of agricultural insurance into the national disaster risk financing strategy and food security policies were among other proposals.

The report is available at SECP’s website on this page.

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