NAIROBI, Kenya, Dec 3 – The International Finance Corporation IFC, in partnership with the European Commission and the Netherlands’ Ministry of Foreign Affairs on Thursday launched a program to help farmers and others in developing countries easily access insurance for natural disasters and to protect themselves from weather-related risks.
IFC is a member of the World Bank Group.
The European Commission has committed €24.5 million as the first donor to a trust fund to finance the advisory services support. The fund is also supported by the Dutch Ministry of Foreign Affairs.
The Global Index Insurance Facility is a scheme that insures against certain catastrophic events, depending on their severity. For example, insurance will be paid out in the event of a wind storm of a certain category, or an earthquake registering a certain magnitude on the Richter scale.
Index-linked insurance products eliminate the need for insurance companies to individually verify claims, reducing transaction costs and making it easier for them to offer products and services in rural communities and in frontier regions, where insurance is rarely available.
Jean Philippe Prosper, IFC Director for Eastern and Southern Africa, said: “The Global Index Insurance Facility will help protect farmers and vulnerable communities against natural disasters that can wipe out their livelihoods and trap them in poverty.”
“IFC is committed to helping extend financial products and services to places where the private sector is at the early stages of development, creating more opportunities for people that need them the most.”
The facility is backed by an advisory services and capacity building program that will provide substantial funding to raise the capacity of insurance companies to provide index-based insurance, help develop such products, and work to create a favorable regulatory environment by advising governments on possible regulatory changes.
Bernard Rey, Head of Operations of the European Union Delegation to Kenya, said: “As the threats posed by climate change increase, the Global Index Insurance Facility will help people in Africa, the Caribbean, and Pacific regions reduce their vulnerability to external shocks and natural disasters and thereby support their livelihoods."
IFC is the only international financial institution focused exclusively on the private sector, the engine of sustainable development in emerging markets. Along with IBRD, IFC is currently seeking a capital increase to strengthen its ability to create opportunity for the poor in developing countries – including helping farmers and others access insurance.