Index based crop insurance project

Project Basics

In June 2008, Développement international Desjardins (DID) received a grant from the Microinsurance Innovation Facility to conduct a feasibility study for the development of a successful replication strategy for indexed crop insurance in Sri Lanka. The study was carried out with the support of SANASA Insurance Co Ltd (SICL), a Colombo based insurance company that supports a cooperative network of nearly 8,400 savings and credit institutions located across Sri Lanka with insurance offerings. SICL wanted to examine if agricultural insurance products adapted to the needs of its primarily rural clients could help improve their standard of living. The study aimed to assess farmers’ insurance needs, determine how the index-based crop insurance model used by BASIX, an India based MFI, could be adapted to the Sri Lankan environment, and create a financial model for the adapted microinsurance product in SICL’s product offering.

Based on the study, it was indicated that the implementation of an agricultural insurance plan by SICL would not only be possible, but also very beneficial to the 400 000 members of the SANASA group who were directly dependent on agriculture for survival. Further, the study recommended a pilot in two areas, using aids developed by BASIX, followed by expansion to other areas. The financial model indicated a five-year countrywide rollout.

SANASA applied for and received a grant from the Microinsurance Innovation Facility to implement the Index-Based crop insurance project, with DID as the project coordinator and services support provider and BASIX as the provider of training manuals and consumer awareness plans. The project aims to minimize Sri Lankan farmers’ risk of an income loss due to unfavourable weather conditions. The project is centered on the adaptation of a weather-based crop insurance model used in India, to the Sri Lankan environment including the development and testing of new methodologies to streamline the overall process, improve delivery mechanisms, and raise the awareness of insurance among rural Sri Lankans.

Eventually, the project should support the development of a grassroots cooperative insurance model and strengthen SANASA’s capacity to fully understand and safely manage weather-based insurance.

Date of last Learning Journey update: February 2012