In January, the Ministry of Planning and Finance approved a two-year pilot crop insurance project aiming to cover damages to crops as a result of erratic weather conditions in Myanmar.

The project, which will first be carried out on an experimental basis, is being offered by Global World Insurance, and will cover only paddy for now. It will commence this paddy season and cover the Yangon, Ayeyawady, Magwe and Mandalay regions.

It is also the first time a crop insurance scheme is being implemented in the country. In Myanmar, insurance is mainly offered by state-owned provider Myanma Insurance and a smattering of private insurance companies. However, the existing portfolio of products and services does not include crop insurance.

This is the case even though agriculture accounts for one third of Myanmar’s GDP, provides jobs for half the population and represents one fifth of the country’s exports.

Meanwhile, the production cost of paddy is also higher in Myanmar compared to neighbouring countries due to poor infrastructure and technology. Farmers are at the mercy of unpredictable weather conditions and crop damage due to pests and disease.

But while countries such as India and Thailand have provided a crop insurance system for farmers since 1970, there is no such system to protect Myanmar farmers against losses if crop yields are lower than the expected volume. As such, crop insurance is urgently needed in the country.

Premium rates

One of the challenges to implementing crop insurance is setting a suitable premium rate. This is because there is no prior benchmark in Myanmar and no qualified actuary to measure risk levels in the country’s insurance sector, officials from Global World Insurance said.

As such, the pilot project is being carried out to gauge and set a suitable crop insurance premium rate.

To start of, Global World Insurance will calculate the premium rate, based on the market price of paddy across one acre of farmland. Should compensation payouts be required in the event of bad weather, this will be calculated based on the market price per acre of paddy harvested in each region.

Policy holders are entitled to a one-time insurance payout if their crops are damaged as a result of bad weather within the one year-insurance period, which includes the summer and rainy seasons.

Compensation amounts will be verified by Global World Insurance and a farmland management committee.

Lack of support

The other challenge is a lack of government and private sector support. Even though the pilot project was proposed in 2016, it was submitted to parliament only in June 2017 and approved this year, said U Soe Win Thant, director of Global World Insurance.

The government and private sector should work together to make crop insurance a success in Myanmar and help farmers reduce losses, said MP U Myo Zaw Oo.

Currently, state-owned Myanmar Agricultural Development Bank (MADB) provides loans to farmers who suffer losses from poor crop yields. The MADB should also include crop insurance premiums as part of their loans to farmers, said U Soe Win Thant.

He added that Global World Insurance is now discussing ways to implement such policies with the MADB.

Meanwhile, the Ministry of Agriculture, Livestock and Irrigation is also talking to several insurance companies from Japan about options to offer similar crop insurance policies to Myanmar farmers.

“Crop insurance is necessary in Myanmar. We should ensure the implementation of a functioning insurance system to protect our farmers,” said U Myo Tint Tun, deputy secretary of the  Ministry of Agriculture, Livestock and Irrigation (MOALI).

Dr Tun Win, agricultural expert and former deputy minister of MOALI, said having crop insurance is important in drawing more foreign direct investments into agriculture. “If the crops are left at the mercy of the weather without any protection, no one will invest capital in the sector. So, it is important to hedge against damage caused by weather,” he said.

“We are working closely with the government to ensure an effective crop insurance system is implemented in Myanmar,” sai U Soe Win Thant.

Source: https://www.mmtimes.com/news/crop-insurance-protect-paddy-farmers-available-soon.html