Agricultural insurance in Maghreb and the Middle East
Efforts aimed at improving the penetration rate of this market have been exerted over all continents. In Africa and the Middle East, agricultural insurance seems to be a huge but untapped premium potential.
Agricultural insurance in Algeria, Morocco and Tunisia
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Agriculture is of particular importance in North Africa, especially in the countries of the central Maghreb, a region renowned for its agricultural specialty. The importance of this activity has been highlighted since the third century BC with Carthaginian Magon(1) who drafted an encyclopedia compiling agricultural practices of ancient Numidia's inhabitants. This document had facilitated the transfer of knowledge to the other regions of the world, standing as a reference for several centuries.
Apart from its historical aspect, the agricultural sector has always held special significance in the Maghreb economy. A global report published by FAO and dated in 2014, entitled “the State of Food and Agriculture”(2) , finds that agriculture is employing one third of the entire population. This sector ensures food security, generates people’s livelihoods and provides raw material required for industry.
(1) Magon or Mago is a third or second century BC Carthaginian scholar(2) www.letemps.com.tn/article/86861/lagriculture-familiale-nourrir-le-monde
Agriculture: balancing between vulnerability and stability
The socio-political turmoil that has characterized the Maghreb countries during the Arab Spring have not had a direct impact on the agricultural sector which stayed away from these events. The same finding remains valid with regard to the last global financial crisis.
While agriculture may seem indestructible, it remains, nonetheless, very vulnerable. In the Maghreb countries, small farmers are required to deal with a multitude of risks, those related to climate, production, market conditions… Hence, the importance of an agricultural insurance scheme to secure and protect this vital but frail activity.
Share of agriculture in the Maghreb countries’ GDP in 2015
| Country | GDP'share in % |
|---|---|
| Algeria | 12.7 |
| Morocco | 14.5 |
| Tunisia | 10.4 |
Agricultural insurance in Maghreb
The history of agricultural insurance is more or less the same in the three central Maghreb countries. This activity was introduced in early 20th century by French settlers. In order to protect their investments, the latter had imported an agricultural insurance plan which was already available in France, hence the creation of the first agricultural mutual plans in the Maghreb region.
Agricultural insurance in Maghreb: first experience in Algeria
The first experience of agricultural insurance dates back to December 17, 1907, the year when the Algeria’s central reinsurance fund for agricultural mutual was established. It was designed to insure the agricultural holdings of farmers against hail. Two years later, Algeria’s general governor decided to extend insurance activities to Tunisia. The recently-established mutual took the name of central Algerian and Tunisian fund “Hail-Livestock”.
In 1912, there was a new change with the establishment of a new agricultural mutual in Tunisia: The Caisse Régionale d’Assurances Mutuelles (the regional fund for mutual insurance) “Tunis Assurances”. The latter merged with its Algerian counterpart in 1919.
Talks between the delegates of the central fund whose headquarters was located in Algiers and top protectorate authorities in Morocco ushered in 1921 in the opening of three regional funds in Casablanca, Rabat and Oujda. The latter proposed insurance products against livestock mortality and hail.
Agricultural insurance in Maghreb in the Pre-independence period
The growth of agricultural mutuality in the Maghreb has been hindered by several events, the first of which was the outbreak of the Second World War. Starting from September 1, 1939, thousands of partners had progressively been mobilized. That event had a great impact on the activity of Caisse Centrale (central fund), main insurer of the region. The second salient event was the Allied troops landing in North Africa in 1942 which triggered the breaking of relations between France and the Maghreb countries, making receipt of contributions even harder.
The agitation and turmoil preceding the independence of both Tunisia and Morocco and the trouble that ensued upon the outbreak of the Algerian war had pushed mutuality to extend its operations toward the social field. The objective was to make sure that the entirety of the risks sustained by farmers are indeed covered. A new product called “riots and civil commotion” consequently saw the light of day, thus enabling farmers to get protection against new risks.
Agricultural insurance in Maghreb in the independence
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As soon as independence was acquired, the three central Maghreb countries have committed to the task of recovering institutions.
On 28 April 1961, Tunisia set up the Caisse Nationale d’Assurances Mutuelles Agricoles (CTAMA) which took over the activities of the agricultural mutual that had been operational under the protectorate.
Morocco follows in Tunisia’s footsteps, adopting the same approach in 1963, seven years after its independence. The Cherifian Kingdom merged the three regional funds, then available, into a single entity. The Mutuelle Agricole Marocaine d’Assurance MAMDA (the Moroccan agricultural mutual insurance) was born.
In 1969, the Mutuelle Centrale Marocaine d’Assurance MCMA (the Moroccan central mutual insurance) saw the light of day, covering peasant’s non-agricultural risks (health, decease, workmen's compensation, pension, etc.).
In Algeria, things stagnated for a few years after independence when the Algerian government set up in 1972 the Caisse Nationale de la Mutualité Agricole CNMA (the national fund for agricultural mutual). The entity joined three funds: the central reinsurance fund for agricultural mutual (CCRMA), the central fund for social agricultural mutual (CCMSA) and the agricultural mutual fund for pension (CMAR).
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The state of agricultural insurance in the Maghreb
In the countries of central Maghreb, agricultural insurance remains quite insignificant, struggling to get positioned despite its rich history and the great potential exhibited by the region. The fragmentation of lands, made up at 84% of family farms, stand as an impediment for the development of this activity.
Agricultural insurance in Tunisia
In 2015, the agricultural sector held a privileged position in the Tunisian economy, standing as the main activity characterizing rural regions. It accounts for 10.4% of GDP, employing 13.4% of labor force and attracting 9.4% of the country’s investments(1).
In 2016, Tunisia accounted for nearly 516 000 farmers, with just 40 000 of them having contracted an insurance cover, that is, 8% of the targeted population. This percentage amounts to 20% for farmlands of more than 10 hectares. The poor penetration rate of agricultural insurance puts the sector at the mercy of climate hazards.
Farmers’ lack of membership in insurance plans is mainly due to the fragmentation of agricultural lands. The insurability of small holdings is difficult because of the relatively high cost of the coverages provided.
It is noteworthy that lands below five hectares account for 53% of the number of agricultural holdings in Tunisia, whereas those below ten hectares represent 73%. (see table here below)
(1) FTUSA, agricultural insurance in Tunisia- Mansour Nasri, G.M of CTAMA. (12/06/17)Number of farmers and exploited areas
| Area | Number of farmers | % |
|---|---|---|
Less than 5 ha | 276 000 | 53 % |
From 5 to 10 ha | 102 000 | 20% |
From 10 to 50 ha | 124 000 | 24% |
From 50 to 100 ha | 10 000 | 2% |
More than 100 ha | 4 000 | 1% |
Total | 516 000 | 100% |
Agricultural insurance remains dependent on the conditions and terms for the granting of agricultural loans. In 2015, this class of business accounted for merely 0.34% of the market’s direct turnover. The amount of the written premiums attained 5.66 million TND (2.79 million USD), down by 24.7% in comparison with 2014. According to the evaluation report conducted by the Tunisian federation of insurance companies (FTUSA), CTAMA accounts for 53.4% (1) of the market shares, followed by ASTREE and COMAR, with respectively 17% and 16.4% of agricultural risk portfolio.
Evolution of agricultural insurance turnover in Tunisia: 2010-2015
| 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | ||
|---|---|---|---|---|---|---|---|
Agricultural premiums | In TND | 9 305 357 | 7 293 637 | 6 821 990 | 5 790 292 | 7 526 176 | 5 666 018 |
| En USD | 4 571 357 | 4 879 151 | 4 404 140 | 3 533 815 | 4 049 986 | 2 802 582 | |
Market total premiums | In TND | 1 120 357 324 | 1 177 905 088 | 1 285 468 774 | 1 412 670 155 | 1 556 068 953 | 1 679 011 541 |
| In USD | 785 258 448 | 787 971 387 | 829 872 931 | 862 152 595 | 837 351 824 | 830 489 478 | |
Market shares | 0.83% | 0.62% | 0.53% | 0.4% | 0.48% | 0.34% | |
Agricultural insurance in Algeria
Just like Tunisia, agricultural insurance is scrambling around in Algeria. According to the Foundation for World Agriculture and Rurality (FARM), 5% of Algerian agricultural holdings have an insurance policy, that is, 50 000 insured out of approximately one million agricultural holders.
As far as the World Bank is concerned, the agricultural sector accounted for 12.7% of GDP in 2015. In 2016, agricultural insurance generated 3.4 billion DZD (30.89 million USD) in premiums compared to 3.8 billion DZD (35.6 million USD) one year earlier, down by 10%. The agricultural class of business accounted for 2.6% of the life and non life market’s direct turnover. CNMA, main player on the market, controlled 75% of agricultural risk portfolio in 2015(1).
Evolution of agricultural insurance turnover in Algeria: 2010-2016
in thousands| 2010 (2) | 2011(3) | 2012 (3) | 2013 (3) | 2014 (3) | 2015 | 2016 | ||
|---|---|---|---|---|---|---|---|---|
Agricultural premiums | In DZD | 1 237 287 | 1 626 000 | 2 247 000 | 2 786 000 | 3 269 000 | 3 757 444 | 3 371 530 |
| In USD | 16 963 | 21 544 | 28 874 | 35 856 | 37 397 | 35 252 | 30 634 | |
Market total premiums | In DZD | 81 082 490 | 87 329 000 | 100 182 000 | 114 885 000 | 125 472 000 | 128 422 145 | 130 973 012 |
| In USD | 1 111 641 | 1 157 109 | 1 287 339 | 1 478 570 | 1 435 400 | 1 204 857 | 1 190 021 | |
Market shares | 1.5% | 1.9% | 2.2% | 2.4% | 2.6% | 2.9% | 2.6% | |
(2) Annual reports of insurance national council (CNA)
(3) Quaterly reports of insurance national council (Conseil National des Assurances)
Agricultural insurance in Morocco
Agriculture is a strategic sector in Morocco, contributing by 14.5% in GDP, but this business remains quite exposed to the risk of drought. In order to put up with this hazard, the Moroccan authorities launched in 1994 a drought insurance program for cereals but the project failed to yield the results expected. The beneficiaries lost interest in the plan due to the very low compensation disbursed. Following this initial experience, the State introduced in 2008, within the framework of Green Morocco Plan, a new insurance development scheme with highly subsidized products.MAMDA, the main player on the market and big partner of the project, set up in 2012 a multi-risk crop plan covering cereals, vegetables and oilseed products. This plan was supplemented in 2014 by a new comprehensive climate coverage targeting fruit tree growing. This scheme is designed to insure agricultural holdings against six weather hazards (icing, hail, floods, high temperatures, strong gusts of wind and chergui)(1).
In 2016, the total insured area amounted to 1.08 million hectares(2) versus 327 000 hectares in 2011. The number of farmers having underwritten an insurance policy was 50 012 in 2016 compared to 3 784 insured five years earlier. Small farmers accounted for 77% of the insured areas.
This success is, among others, owed to the intervention of the State which subsidized up to 90% of the contributions which are practically insignificant for small holders.
In order to ensure sustainability for this highly subsidized system, Morocco is currently working in association with the Agency for agricultural development (ADA), the French development agency (AFD) and the French fund for global environment (FFEM) on a new project designed for the development of agricultural micro-insurance and index-based insurance.
It is worth reminding that MAMDA is the local leader of agricultural insurance with 70% of market shares(3). The insurance heritage has recently been consolidated with the establishment in 2014 of Mamda Re, a player specialized in the reinsurance of agricultural risks. Endowed with a capital of 121 million USD, Mamda Re has MAMDA as one of its shareholders with 50% stake, the Bermudian reinsurer, Partner Re with 30% and Mutuelle Centrale de Réassurance (France) with 20%.
Evolution of agricultural insurance turnover in Morocco: 2010-2015
in thousands| 2010 | 2011 | 2012 (5) | 2013 | 2014 | 2015 | ||
|---|---|---|---|---|---|---|---|
Agricultural premiums(4) | In MAD | 9 827 | 13 171 | 12 230 | 354 165 | 364 513 | 413 598 |
| In USD | 1 177 | 1 537 | 1 452 | 43 948 | 40 471 | 42 013 | |
Market total premiums | In MAD | 21 872 807 | 23 893 871 | 26 027 722 | 26 733 645 | 28 421 591 | 30 423 749 |
| In USD | 2 621 018 | 2 788 892 | 3 090 531 | 3 317 378 | 3 155 649 | 3 090 444 | |
Market shares | 0.04% | 0.06% | 0.05% | 1.32% | 1.28% | 1.36% | |
(2) http://lavieeco.com/news/siam/assurance-agricole-le-taux-de-penetration-multiplie-par-quatre.html
(3) http://www.fondation-farm.org/zoe/doc/micro_network-brochure_agriculture-def-low_fr.pdf
(4) Figures available only from the risks : hail + livestock + crop insurance
(5)2012 : introduction date of crop insurance
Agricultural insurance in the Middle East
The two most fertile countries in the Middle East, Syria and Iraq, are now undergoing a complicated political and social situation. Consequently, the agricultural class of business, as are the rest of activities, came to a standstill. In 2004, however, an experience was initiated in Syria(1) , a country highly exposed to drought. The government, back then, undertook studies for the introduction of an agricultural insurance plan indexed on climate data.
The Sultanate of Oman which is blessed with a climate that is favorable to the growth of agriculture is now on the brink of establishing an agricultural insurance system. In early 2016, Capital Market Authorities (CMA), the ministry of agriculture and fisheries, along with local reinsurer Oman Re started talks in order to introduce agricultural insurance in the country. Omani agriculture is up against several risks: drought, flood, plant diseases… It is noteworthy that agriculture contributed with 1.6% to GDP in 2015.
Despite their financial prosperity, the other Gulf countries are faced with challenges of structural kind. Their population continues to grow while water resources are getting scarcer and arable lands are shrinking day after day. In light of this situation, these rich countries have been resorting for years now to agricultural monopolization.
The United Arab Emirates are exploiting 500 000 hectares outside their territories. Saudi Arabia, on its part, set up extra-territorial annexes of more than 30 000 hectares in the fertile countries of East Africa like Mozambique.
The last 2016 report issued by GRAIN(2) , an international organization aiming at consolidating farmers’ control over food systems, listed 491 large-scale land monopolizations in the last decade. These territorial agreements pertain to more than 30 million hectares in 78 countries.
Other sources, including the World Bank, referred to figures up ranging from 46 million to 60 million hectares. Two thirds of these areas are located in Sub-Saharan Africa while the remaining third is in Asia. The average size of the lands is of 40 000 hectares.
The relentless impact of climate change and crop losses due to extreme weather conditions have pushed many other countries such as Japan, South Korea and China to monopolize arable lands in order to satisfy the growing needs of food production. While these transactions stand as opportunities for the countries that exploit them, they, however, constitute a threat for the development and for the food security of the regions that are exploited.
(1) Crop insurance in developing countries - Food and Agriculture Organization of the United Nations - 2005(2) https://www.grain.org/fr/article/entries/5508-accaparement-mondial-des-terres-agricoles-en-2016-ampleur-et-impact
(3) http://www.jeuneafrique.com/189958/politique/agriculture-l-achat-de-terres-en-afrique-un-business-sous-influences/
Share of agriculture in the Middle Eastern countries’ GDP in 2015
| Country | GDP’ share in % |
|---|---|
| United Arab Emirates | 2.3(1) |
| Saudi Arabia | 2.3 |
| Bahrain | 0.3 |
| Oman | 1.6 |
| Qatar | 0.2 |
| Egypt | 11.2 |
