PARTNER PROFILES SANASA INSURANCE Sri Lanka GLOBAL INDEX I N S U R A N C E FA C I L I T Y FUNDED BY PARTNER PROFILES Country Sri Lanka Market launch 2011 Clients 20,806 tea and paddy farmers (cumulative) Partners Insurers: Sanasa Insurance Reinsurers: GIC- India Delivery Channels: Sanasa Insurance Societies; farmers’ organizations; tea factories Products Two weather index Insured Crops/Livestock Paddy, tea Insured Perils Drought, excess rain Total Insurance Portfolio $86,642 (sums insured cumulative) (total sums insured) Insurance Payouts $65,330 (cumulative) Average Cost of Insurance 10% of value of insured inputs or harvest Development Impact The key objective of the Sanasa Project is to develop the weather index insurance market in Sri Lanka through a combination of capacity building and awareness creation at both company level as well as at the farmer level. Background Historically, agriculture has always been a key economic activity in Sri Lanka, employing over 30 percent of the labor force. As Sri Lanka recovers from the effects of a 26 year armed conflict which ended in 2009, new land is becoming available for agriculture in northern and eastern Sri Lanka. A growing number of micro and small farmers are hoping to benefit from growth in the agricultural sector. The agro-industrial sector is the fastest growing industrial category, with an average annual growth rate of around 5%. However, agricultural productivity is low by global standards, and most farmers have not been able to migrate to value-added agricultural products, which are in demand by the growing middle class and for export. It is estimated that less than 10-15 percent of the Sri Lankan population has some form of insurance, largely life and property insurance. Insurance coverage among small businesses (MSMEs) is estimated to be less than 1-2 percent, and is almost nonexistent for smallholder farmers. Sanasa designed an index product for paddy farmers in 2011 and launched another product for tea farmers in 2012. Insurance will allow farmers access to scarce capital, new farming techniques and technologies and hopefully will lead to increased investment by farmers and improved harvests and livelihoods. Project Description The project will achieve the following objectives by project completion: 1. Support the development of a simple, flexible, affordable Weather-Index Based Crop Insurance product that will cater to diverse client needs for food crops in Sri Lanka 2. Assist in developing institutional capacity of SICL (Sanasa Insurance) and select agents 3. Raise awareness among at least 50,000 farmers on the availability of the index insurance product/s and its benefits Success Factors Continuous farmer education is the most important factor for sales and expanding index insurance markets in Sri Lanka. Farmers need training on how indexes are structured, what they cover and how payouts are measured. Challenges PADDY—The high cost of premiums has inhibited sales of weather index products to paddy farmers.The Sanasa team plans to modify the design to reduce premium costs. Premium subsidies are also being explored as a possible means to reduce costs and expand the market. TEA—A strong awareness campaign though mass media on weather index insurance is needed to promote sales. In addition, there have been difficulties obtaining rainfall data in a timely manner from the meteorological department which has challenged the smooth operation of WII in Sri Lanka. Opportunities There are two million farmers in Sri Lanka, and there is good market potential. The Sanasa Federation has excellent outreach to over one million members through its 8,400 savings and credit institutions in all provinces of the country. The Sanasa Insurance Company has over 250,000 micro-insurance clients. Index insurance is a new sector for the insurance company. Sanasa Insurance hopes to have 50,000 farmers insured with weather index insurance by end 2015. Contacts Rathnija Arandara, TArandara@ifc.org; Ravinda Herath, ravinda@sicl.lk 2 |