Agricultural insurance in Ghana

A group of men next to a weather station

Picture: GIZ

Ghana is highly vulnerable to the effects of climate change. By 2100, it is likely that the average daily temperature will have risen by three degrees, which will have a negative effect on agriculture. Fertile soil will be lost, crop yields reduced and financial risks will increase as a result of frequent, prolonged droughts, floods and other extreme weather events. The population has no way of safeguarding themselves against these kinds of situations. This jeopardises the livelihoods of many families and damages the national economy.  

An International Climate Initiative (ICI) project, which is being implemented by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), is therefore developing insurance schemes that protect against financial risks in the agriculture sector resulting from extreme weather events and other effects of climate change. It uses a multilevel approach, addressing the political and economic frameworks, the meteorological infrastructure, and the current level of knowledge on climate change risks and possible solutions.  

Cooperation with political actors and the private sector

The project works closely with the National Insurance Commission (NIC), which not only regulates the sector but is also responsible for the further development of the insurance market. With the support of the Sustainable Economic Development Programme financed by the German Federal Ministry for Economic Cooperation and Development (BMZ), the insurance legislation in Ghana has been completely reworked; amendments have been made to meet international requirements and information on index-based insurance schemes has been included. The draft will soon be brought before the Ghanaian Parliament for approval. In addition, a committee of high-ranking representatives from the insurance industry, the agricultural sector, the Ghanaian finance and agriculture ministries, the NIC, the World Bank and GIZ meets monthly to oversee the introduction of agricultural insurance products.

Together with insurance companies, the project assesses which value chains (e.g. maize, cocoa, rubber, bananas, etc.) generate demand for insurance products. The objective is to develop – together with reinsurers, insurance companies and financial institutions – innovative insurance products, including corresponding market entry strategies. The first insurance product for insuring maize harvests against too little or too much precipitation entered the market in June 2011, and the first policies have already been sold.

Improving information availability

Insurance solutions require reliable meteorological data. A feasibility study is therefore examining the climatic conditions for agriculture in Ghana and the weather dependency of various crops. At the same time, the project is analysing the quality of the meteorological infrastructure, and also providing advice and training to the Ghana Meteorological Agency (GMet) to enable it to independently collect and process weather data for actuarial purposes. At present, the project is providing materials for 15 new weather stations to further improve basic data. 

Public relations work and information materials such as videos, radio spots, plays, brochures and posters provide information to insurance companies and their partners, as well as the policyholders themselves, on the benefits, costs and risks of climate-related insurance. Training courses increase the competence of employees from insurance companies, microfinance institutions and farmers’ associations. The insurance industry will establish a centre of excellence for agricultural insurance, which is to develop products for the insurance industry.

Project impact and sharing lessons learned

The project is improving the income security, food security, credit supply and employment opportunities of the rural population in Ghana. It also helps to attract foreign direct investment in select value chains and to open up international markets. The experience gained through the project in Ghana will be systematically assessed and shared with other countries throughout Africa and beyond.