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Oromia Insurance Company S.C (OIC) Signs an Agreement with Three Insurance Companies to Render Index Based Livestock Insurance (IBLI) in Somali Region

Oromia Insurance Company S.C. (OIC) signed a Pool Agreement with three insurance companies (Africa, Niyala and Ethiopian Insurance Corporation) on June 29, 2017 to work on Satellite Index Insurance for Pastoralists in Ethiopia (SIIPE) project with the support of World Food Program (WFP). This program aims to merging the Productive Safety Net Program (PSNP) with the Index Based Livestock Insurance. The agreement will stay in force for five years with a target of reaching 5,000 pastoralist household in first year and 100,000 within five years. The program will be launched on October 2017 in three districts of the Somali Regional State, namely: Adadle, Kebridehar and West Imey. In this program, it was agreed that the Normalized Vegetation Difference Index (NDVI) data provider will be the National Meteorology Agency (NMA).  

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OIC is one of the pioneer insurance firms that introduced microinsurance to Ethiopia. On top of these, OIC is the first insurance firm in Ethiopia in introducing Index Based Livestock Insurance (IBLI), a new insurance product that has been implemented in Kenya for the first time. OIC is second in implementing the product both in Africa and the world and it was launched in August 2012.  Even though there are some starts, OIC still remains the only insurance company rendering Index Based Livestock Insurance Product in the country. The International Livestock Research Institute (ILRI) and Cornell University designed Index Based Livestock Insurance (IBLI), a drought insurance product that enables pastoralists to transfer drought risks to insurance company.

 In October 2016, OIC paid claim amounting to Birr 293,000 for 258 pastoralists of Miyo, Moyale and Dugda Dawa Woredas of Borena and West Guji Zones, Oromia Regional Estate who were suffered from forage scarcity caused by drought. In the same manner, OIC has paid Birr 1.6 million for 1,474 pastoralists living in the same Zones and ten districts on February 18 2017. Initially, it was an asset replacement (that compensates at the end of contract period) contract designed to compensate pastoralist against forage scarcity that may happen as a result of drought. Later on, the product has been improved to asset protection contract which compensates pastoralists before the animals start dying that help pastoralists in purchasing supplementary foods and water to keep their animals alive during the drought season till the next rainy season. It uses an NDVI based index to trigger the insurance and the satellite monitors level of forage availability (greenness).

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On the other hand, OIC commenced Weather Index Crop Insurance (WICI) for farmers who are living in rift valley area of East Showa, West Arsi and West showa Zones, who have been suffering from persistent rainfall shortages in collaboration with Japan International Cooperative Agency (JICA) in 2013 in 12 kebeles. In 2014 OIC did an expansion and reached 45 kebeles in four Zones, adding South-West Showa Zone.

In 2015, in collaboration with the federal Ministry of Forest and Environment under PAA project, OIC launched its second weather index crop insurance project by the support from UNDP in Kemo Gerbi and Desta Abjata kebeles of Adami Tullu Jiddo Kombolcha Woreda.

To this end, on December 19, 2016, OIC paid Birr 380,000 (three hundred eighty thousand) claim for farmers suffered from rainfall deficit in the area that were covered by our WICI, PAA project. During the 2016 cropping season rainfall shortages has happened to farmers of two kebeles of Adami Tullu Jiddo Kombolcha Woreda of East Showa Zone Oromia Regional Estate. About 400 farmers living in the two kebeles, namely: Kemo Gerbi and Desta Abjata kebeles received their second year payout. In the same manner, claim amounting to Birr 561,841 has been lodged and paid in Vegetation Index Crop Insurance as well. Totally, in crop insurance, claim amounting to Birr 941,841 has been paid in 2016/17 fiscal year to 4,235 farmers living in the rift valley of East Showa and West Arsi Zones.

 In a move to improve the Weather Index Crop Insurance product, OIC in collaboration with Kifiya Financial technology PLC sold its first Vegetation Index Crop Insurance (VICI) policy in 2016 digitally, using smart phones and tablets to make premium collection and claims payment easier. The peril covered under this insurance scheme is vegetation difference as captured by the NDVI model.

Totally, both in crop and livestock insurance scheme, OIC paid Birr 2,830,711 during the 2016/17 fiscal year that protected the lives of 5,994 farming and pastoral communities.

OIC began its first microinsurance services in July 2010 by issuing Multi-Peril Crop Insurance Policies to different Farmers’ Cooperative Unions like Ambo, Meki Batu, Becho Woliso, Lume Adama and Erer, one year later after its commencement in to operation in 2009. This makes OIC a unique insurance company in the industry.