Land Bank Insurance Company has expanded its pilot “index insurance” product with the introduction of Area-Yield Index Insurance (AYII), designed to help farmers manage financial losses caused by large-scale climatic and environmental risks.

The new AYII product complements LBIC’s Pasture Drought Index Insurance (PDII), which protects livestock farmers against the impact of drought on grazing conditions. AYII is tailored for crop farmers cultivating maize and soya beans in selected provinces.

Coverage for smallholder farmers

AYII was developed in partnership with CelsiusPro, which assists organisations worldwide to mitigate financial risks from climate events, and the International Finance Corporation (IFC), part of the World Bank Group.

IFC provided advisory support through its Africa Inclusive Insurance Program, funded by Germany’s Federal Ministry for Economic Cooperation and Development (BMZ) and the Dutch Ministry of Foreign Affairs.

The product compensates farmers when actual crop yields in a district fall below the district’s historical average, addressing systemic risks such as drought, floods, or pest outbreaks. Unlike traditional crop insurance, AYII does not require individual farm assessments.

Pay-outs are based on official area-level yield data from the Directorate of Agricultural Statistics and Economic Analysis of the Department of Agriculture, and claims are processed automatically within 30 days of data release.

Coverage areas and crops

The pilot will initially be available to smallholder maize and soya bean farmers in the following provinces:

• Maize: Free State, KwaZulu-Natal, Mpumalanga, North West
• Soya bean: Free State, KwaZulu-Natal, Mpumalanga, North West, Limpopo

Key features of AYII

• Pay-outs based on verified district yield data, removing the need for individual assessments
• Settlements within 30 days of yield data release
• Reduced administrative costs make the product more accessible to smallholder farmers
• Coverage against key perils, including drought, floods, and pest outbreaks

Building on Pasture Drought Index Insurance

LBIC’s PDII is currently available in Eastern Cape, Limpopo, North West, KwaZulu-Natal, and Mpumalanga, providing compensation to livestock farmers during severe droughts when grazing falls below established thresholds.

Together, PDII and AYII form part of LBIC’s broader approach to expand agricultural risk management solutions to underserved farming communities.

The initiative is supported by a catalytic grant from the Natural Disaster Fund (NDF) through its Technical Assistance Facility.

The NDF, managed by Global Parametrics and funded by the UK government’s Foreign, Commonwealth and Development Office (FCDO) and Germany’s KfW on behalf of BMZ, provides risk capacity in partnership with Hannover Re to support parametric solutions for vulnerable communities in low- and middle-income countries.

Source - https://www.bizcommunity.com