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ACA’s Weather Index Insurance Based on Value Chain with
Integrated Risk Management for Sustainable Farming
Jakarta April 16th 2019
Webinar - MEFIN
Jakub Nugraha
Division Head of Micro Insurance and Agriculture Insurance
PT Asuransi Central Asia - Indonesia
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Ecosystem – Integrated Risk Management – Product – Results - Challenges
Ecosystem based on Value Chain and Risk Management
Stakeholders Main Role Reduce the possibility of harvest failure by
1. Farmers
group
Executor Change behavior in managing the plant under agronomist’
guidance improve product quality ; increase yield ; get
good selling price ; payback the loan before due date
2. Seed/inputs
company
(pesticide,
fertilizer, etc.)
Good Agriculture
Practice +
dedicated
agronomist
Reduce the possibility of harvest failure = minimize attack of
pest, disease, virus + ensure each farmer to implement GAP
3. Rural bank Loan for farmer Reduce the possibility of harvest failure = ensure that farmer
has enough money to pay back the loan (NPL < 3%) ; give
confidence to RB’s management that agriculture loan is good
business as long as the ecosystem has been set up
4. Insurance Weather Index
Insurance
Disseminate the concept of risk management to each of
stake-holders ; manage the loss ratio
5. Irrigation
agency
Supply local
rainfall data
Accurate and consistent rainfall data supply that will be
disseminated to farmers
6. NGO Enabler /
aggregator
Manage that each of the stake-holders do their own roles as
have been agreed since setting up the ecosystem
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Ecosystem – Integrated Risk Management – Product – Results - Challenges
Ecosystem based on Value Chain and Integrated Risk Management
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Ecosystem – Integrated Risk Management – Product – Results - Challenges
Stakeholders Target Strategies
1. Farmers
group
a. No harvest failure
b. Increase net profit
c. Access to finance
(loan, insurance)
Access to technology:
i. Follow the instruction from agronomist for GAP, incl.
considering weather forecast for planting date
ii. Post harvest management
Access to market:
Good quality = higher selling price offered by off-taker
Access to finance:
Micro loan, micro insurance, micro investment
2. Seed/inputs
company
(pesticide,
fertilizer, etc.)
a. No harvest failure
b. Farmer’s obedience
c. More young farmer
apply smart farming
i. Intense communication with farmers groups
ii. Professional and dedicated agronomist
iii. Incentive program for the best yield
3. Rural bank Non Performing Loan is
less than 3% tightly
monitored by field staff
(Account Officer)
i. Dedicated agronomist and Account Officer
ii. Weather index insurance
iii. Intense communication with farmers + spouse
payback all loan before due date w/ incentive
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Ecosystem – Integrated Risk Management – Product – Results - Challenges
Stakeholders Target Strategies
4. Insurance a. Farmers obey GAP
b. Manage loss ratio
i. Urge farmer to plant in the most suitable week of
planting to ensure sufficient rainfall for each vegeta-
tive phase, generative phase and ripening phase
window planting week relates with the possibility of
lack of rainfall higher premium = higher possibility
of lack of rainfall and claim payment
ii. Ensure the rural bank to put 2 types of risk mitigation
cost as parts of loan component:
a) For pest and disease pesticide, herbicide, etc
b) For drought extra water pumping (water
pump rental, plastic hose, gasoline)
Ease the farmer to get extra cash quickly
should they need for extra water pumping
Reduce the possibility of harvest failure due to
lack of rain
iii. Consistency of daily rainfall data gathering from
trusted source
5. NGO a. No harvest failure
b. Each of the stake-
holders can achieve
her own target
i. Intense communication with each of PICs
ii. Education, socialization of DANA PANDAN to all
stakeholders
iii. Incentive program for the best yield
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Items Notes
1. Name of product Weather Index Insurance – Lack of Rainfall for paddy commodity
2. Location Tulungagung District, East Java Province
3. Trigger Index = the minimum level of rainfall at each growth phase to ensure
sufficient water supply for paddy hit the trigger = various
payout due to growing phase of each plant : Vegetative phase
Reproductive phase, Ripening phase
4. Insurance premium Vary from 2% TSI up to 6% TSI for one sub-district only / season
5. Underwriting factors 1. Satellite-based rainfall data for the last 35 years
2. Weather forecast for the next planting season
3. Size of pixel 5 km x 5 km
4. Types of risk mitigations
5. Types of seed
6. Soil fertility
7. Date of planting
6. Government subsidy NO government subsidy to create farmers’ entrepreneurship
7. Loan interest Loan interest rate is 5-10 % higher than government program
Ecosystem – Integrated Risk Management – Product – Results - Challenges
8. Sum insured IDR 10 million / hectare = USD 702 / hectare
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Items Notes
Real rainfall data
during Vegetative
phase
Automatic Weather Station coordinate : 108.0390833, -6.508555556S
Ecosystem – Integrated Risk Management – Product – Results - Challenges
threshold
= mm rainfall
village
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Ecosystem – Integrated Risk Management – Product – Results - Challenges
Items Ecosystem – Value Chain + Risk
Management
Non Ecosystem – No Value Added of
insurance
Variety Ciherang seed – Dec 2018 planting Ciherang seed – Dec 2018 planting
Location Alas Village, Kroya Sub-District, West Java Alas Village, Kroya Sub-District, West Java
Interest 15% per year 7% per year (government subsidy)
Insurance
Premium
USD 10.5 - USD 70.2/ha USD 2.5/ha season paid by farmer + USD
10.1 (80%) subsidy by government
Harvest Premium quality rice = USD 0.316 / kg Regular quality rice = USD 0.281 / kg
Yield 9.2 ton / ha 6.4 / ha
Net profit USD 2,907 USD 1,798
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Ecosystem – Integrated Risk Management – Product – Results - Challenges
1. Setting up the right stakeholders who has true interest, initiative, commitment for the action plan
2. Agriculture actuary expert + experience agronomist + off-takers
3. Ensure rural bank to joint the program normally take 2 planting seasons to convince, start with demo plot, dry run,
4. Reliable ground weather station
5. Farmers’ willingness to change their old habit
6. Technology = mobile apps, satellite weather data, access to internet
7. How to convince the decision makers in the company, regulators, other ministries that agriculture insurance plays more active roles:
i. Works after the accident,
ii. Contribute more before the accident prevent harvest failure risk and achieve sustainable farming scale up