IFC Partners With PT Reasuransi MAIPARK to Insure Farmers Against Climate Risks

IFC Partners With PT Reasuransi MAIPARK to Insure Farmers Against Climate Risks
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. 
The impacts and effects of adverse weather events—such as droughts, floods, and hurricanes—were felt during the most recent El Niño, when some of the worst hit agribusinesses reported up to 30 percent drops in projected yields.  IFC 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 national program to achieve food security and improve people's productivity will need to be supported by all parties,” said Yasril Y. Rasyid, President Director of PT Reasuransi MAIPARK. “The insurance industry can support the program by providing protection against risks faced by agricultural stakeholders. Our cooperation with IFC allows us to innovate with parametric insurance products for agriculture.” 
Indonesia is highly vulnerable to a variety of climate hazards, including droughts, floods, landslides, and rising sea levels. In 1997, droughts related to El Niño adversely affected more than 500,000 hectares of rice-growing land, as well as yields of coffee, cocoa, rubber, and palm oil. Losses were estimated at $2.75 billion. The most recent El Niño (2015 to 2016) delayed rice crop-cycles, impacting yields and food prices. As a result, around three million people struggled to meet their basic needs. 
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. 
“The region’s changing climate reality has made insurance essential to protect local businesses and strengthen industries so they become resilient to climate change,” said Azam Khan, IFC’s Country Manager for Indonesia and Malaysia. “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 Program, which aims to promote inclusive and sustainable rural growth. Said H.E. Peter MacArthur, Ambassador of Canada, "Canada’s support to the Indonesia Agribusiness Development Program demonstrates our commitment to increasing incomes of Indonesian farmers, as well as our recognition of how climate change is increasing the vulnerability of farmers and agribusinesses throughout the world. Canada is pleased to support this partnership between IFC and MAIPARK to develop weather-related insurance products to ensure sustained productivity for these groups.”