Agricultural insurers have opportunity to protect against food insecurity in years ahead, says Eurobase report

Agricultural insurance is among the most common insurance policies sold in Africa, however the sector is dominated by smallholder farmers who depend heavily on rain-fed production and local markets.

In a new report from Eurobase, Why Africa could miss its food security deadline by 2030, Mark Phipps, group sales and marketing director, warns this makes the sector highly exposed to droughts, floods, and erratic rainfall that can quickly disrupt yields and household income. He said “Many farmers operate with limited access to quality inputs, irrigation, storage and formal services. The result is a sector with enormous potential but persistent structural constraints that threaten food security and economic stability across the continent.”

Phipps fears “We face a moment of urgency. The window to act is narrowing and the cost of inaction will be measured in lost harvests, rural poverty and deepening food insecurity.” Climate change and weather shocks are among the most serious threats to African agriculture. The report stresses droughts, floods and irregular rainfall reduce crop yields, damage livestock systems and increase production risk for farmers. Because many farms rely on rainfall rather than irrigation, even short weather disruptions can cause major losses, it said.

Low productivity remains a structural challenge across the continent. Many farmers face poor soil fertility, limited irrigation, and weak access to improved seed, fertilizer, and modern equipment. These constraints widen the yield gap and reduce the profitability of farming.

Phipps believes reinsurance can help African farmers facing low production through three key mechanisms:

1. Index-based crop reinsurance (weather or yield index) Reinsurers back local insurers offering products that pay out automatically when rainfall, temperature, or area yields fall below predefined thresholds, providing rapid income support in bad seasons. This stabilises farmers’ cash flow, helps them recover faster, and encourages continued investment in seeds, fertiliser and technology despite recent low production.
2. Micro‐insurance backed by reinsurance Reinsurers provide capacity and risk-sharing so local insurers can offer very small, affordable policies bundled with inputs (seed, fertiliser) or mobile services. These covers protect farmers against severe losses, support repayment of input loans, and can be used as collateral to unlock credit and investment after a poor harvest. 3. Parametric and area‐yield reinsurance programmes Reinsurers support parametric or area-yield schemes where pay-outs are triggered when district or regional yields drop below a long-term average, covering widespread droughts, floods, or pest outbreaks. This helps governments, cooperatives, and aggregators provide timely compensation at scale, reducing the impact of systemic low production on rural livelihoods and food security.

The subject of how to improve insurance across the sector will be explored at the upcoming Kenya Re summit in Ivory Coast next month. Managing director Hillary Wachinga stresses that solutions can be found and that is why he is bringing together governments, regulators and experts from across the insurance value chain.

The Eurobase report concludes Africa’s agriculture is not failing because of a lack of potential, it is failing because the systems around it are too weak to support that potential. The challenges are deep, interconnected and urgent. But they are also solvable.

As Phipps said “Reinsurance is not the whole answer. It is, however, a powerful enabler that can unlock finance, reduce risk and strengthen the resilience of millions of smallholder farmers. By sharing extreme climate risk, reinsurance can make insurance affordable and sustainable, improve insurers’ capacity to pay claims and give lenders the confidence to extend credit.

“We cannot wait for the next drought, the next harvest failure, or the next food security crisis to force our hands. The time to act is now. With coordinated investment in climate-smart agriculture, irrigation, storage, finance and market reform and with reinsurance as a key part of the solution, we can build an agricultural sector that is not only more productive and resilient, but also capable of securing Africa’s food future for generations.”