There is a need for bundling agricultural risk coverage with farm credit in a bid to scale up the weather index-based crop insurance in Bangladesh, ADB country director Manmohan Parkash said at an international seminar in the city Sunday.
The Bangladesh chief of the Asian Development Bank (ADB) also placed six key suggestions at the seminar to improve the ability of the country's agriculture sector to tackle climate and weather risks.
"The very sustainability of agriculture is threatened, given the high exposure to extreme weather events brought about by climate changes," he added.
Sadharan Bima Corporation (SBC) is implementing a pilot project on weather index-based crop insurance over past few years in three districts-- Rajshahi, Sirajganj and Noakhali. The project will end on June 30 next.
"For scaling up the risk coverage, agricultural insurance with farm credit and farm inputs should be considered," Mr Parkash said.
He argued that it would serve as a financial support to the farmers in the event of crop failure and help stabilise farm incomes and restore the credit eligibility of a farmer for the next season.
Mr Parkash made the observations while speaking as a guest of honour at an international seminar on weather index-based crop insurance held at a city hotel.
SBC Managing Director Syed Shahriyar Ahsan presided over the inaugural session of the two-day seminar. Chairman of Insurance Development and Regulatory Authority Md Shafiqur Rahman Patwary was present as the chief guest at the session.
The ADB country director also said the advent of scalable technologies such as block chains and smart contracts need to be embraced to link value chain financing for smallholders with value chain risk management as agriculture and financial services move into the digital age.
"Agriculture is the world's least digitalised sector, a prime candidate for disruption," Mr Parkash said.
Even digital technologies can enhance actuarial estimations and reduce the cost of delivering and monitoring insurance products, he said.
The ADB Bangladesh head said smart government investment should include funding the development of risk market infrastructure for farm and weather data collection, measurement and forecasting.
Mr Parkash said the basis for scaling up sustainable agricultural insurance should include a partnership between public and private sectors.
He said insurance has been suggested as a potential adaptation tool to reduce climate variability and the agriculture sector's vulnerability to extreme weather.
He also placed another suggestion for scaling up farm insurance. The government needs to examine setting up of an agriculture insurance pool, given the sizable financial exposure associated with correlated losses, insurers' lack of experience with this kind of insurance and lack of access to commercial reinsurance on competitive terms.
"Such a pool can play a role in incentivising the development of insurance products along with agriculture value chains," he said.
While speaking as the chief guest, Mr Patwary said this is high time to scale up crop insurance across the country.
Terming the country's agriculture sector 'always risky', the IDRA chairman said this now emerged an adaptation tool for the famers.
SBC managing director Ahsan also echoed the views of the ADB country director. Innovative insurance products may be best if this is a bundle product, he added.
Additional secretary of the Financial Institutions Division Arijit Chowdhury, member of the IDRA Gokul Chand Das and project director of the weather index-based crop insurance of the SBC Wasiful Hoq also spoke at the inaugural session.
The SBC's weather index-based crop insurance office settled claims worth Tk 5.35 million against some 9,096 policies in 20 upazilas of the three districts.
jasimharoon@yahoo.com