Friday June 14, 2024

SECP urges agricultural insurance expansion

By Israr Khan
June 08, 2024
The picture shows the building of the Securities and Exchange Commission of Pakistan (SECP). — The News/File
The picture shows the building of the Securities and Exchange Commission of Pakistan (SECP). — The News/File

ISLAMABAD: Pakistan’s agricultural sector, comprising 22.9 per cent of the nation’s GDP, faces formidable risks from climate change, and yet its insurance sector accounts for a mere 2.0 per cent of the total premium in the non-life insurance arena.

In a move to address this disparity, the Securities and Exchange Commission of Pakistan (SECP) released a comprehensive report on Friday. The report covers agricultural and livestock insurance and highlights the strategies aimed at promoting the agricultural insurance sector in Pakistan, addressing demands, and fostering its growth.

The report underscores the substantial risks confronting the sector, including climatic variations, floods, droughts, pests, diseases and escalating costs. Of particular concern is the looming threat of climate change, with projections indicating a 3 degrees C temperature rise by 2040. To mitigate these risks, the report advocates for an expanded agricultural insurance framework.

While agricultural insurance enjoys a robust presence globally, spanning over a hundred countries, its traction in Pakistan remains underdeveloped and constrained. Currently, government-led insurance schemes extend coverage to a mere 14 per cent of farmers, necessitating urgent expansion and enhancement, the report adds.

The in-depth scrutiny of government-led agricultural insurance schemes, such as crop loan insurance, livestock insurance for borrowers, and the Punjab government’s crop insurance scheme, is provided in the report. Moreover, it examines various pilot initiatives spearheaded by private entities.

Challenges highlighted in the report encompass limited coverage, antiquated practices and tepid industry participation. Pilot programmes by TPL Insurance Limited, Salaam Takaful Limited, and Asia Insurance exhibit promise -- albeit amid additional hurdles including accessibility issues, regulatory voids, data deficiencies and a dearth of insurance culture among farmers.

The report’s recommendations are comprehensive, advocating for the establishment of insurance pools, implementation of national crop and livestock insurance, and seamless integration with social protection programs. Recognizing the pivotal role of policymaker support in realizing objectives such as food security, disaster risk financing, and economic stability, the report underscores the imperative of collaboration among ministries and disaster management authorities. Suggested strategies for bolstering collaboration include bundling insurance with inputs and harnessing technology for streamlined claims processing, underscoring the multifaceted approach required to fortify Pakistan’s agricultural insurance landscape.