Crop Insurance for Climate Resilience: Priorities for South Africa’s G20 Presidency

The policy brief argues that while crop insurance can enhance climate resilience and food security by protecting livelihoods and encouraging investment, adoption in Africa remains low due to design flaws and affordability. It reviews lessons from multi-peril and index-based insurance, highlighting the need to reduce basis risk through AI and digital innovations. The authors recommend that South Africa's G20 presidency promote high-quality, inclusive insurance products, integrate them into holistic risk management strategies alongside social protection, and develop 'smart subsidy' approaches tailored to different farmer profiles.

• Climate change disproportionately affects African economies due to their heavy reliance on rain-fed agriculture and a lack of safety nets; globally, 18% of people are at risk from severe weather events, but this proportion is more than double in Africa.
• Historical multi-peril crop insurance (MPCI) programmes often failed because they insured yields, which created moral hazard by not incentivizing farmers to prevent losses and undermining lending practices.
• Index-based insurance (IBI) was designed to lower costs by removing the need for farm-level loss assessments, but it struggled to scale due to basis risk—the gap between payouts and actual losses—as well as liquidity constraints and lack of trust.
• Innovations to reduce basis risk and increase demand include 'gap insurance' (combining index insurance with audits), 'insurance coupons' for narrow risk regions, and picture-based insurance (PBI) using smartphones for remote damage assessment.
• Reliable crop insurance can drive economic growth; farmers with coverage increased farm investments in higher-return activities, resulting in average income growth of 1–9%.
• Sovereign insurance, such as the African Risk Capacity (ARC), can strengthen social protection by insuring the increased public spending required when safety nets are scaled up after weather shocks.
• Public subsidies for insurance should be differentiated: smallholders near the poverty line should have subsidies linked to safety nets, while commercial farmer subsidies should target market development, such as weather station infrastructure and digital banking.

APA

Kramer, B., & Hill, R. (2025). Crop Insurance for Climate Resilience: Priorities for South Africa’s G20 Presidency. South African Institute of International Affairs. https://saiia.org.za/wp-content/uploads/2025/09/SAIIA_PN_16_KramerHill_G20CropInsurance1.pdf

Chicago

Kramer, Berber, and Ruth Hill. Crop Insurance for Climate Resilience: Priorities for South Africa’s G20 Presidency. South African Institute of International Affairs, 2025. https://saiia.org.za/wp-content/uploads/2025/09/SAIIA_PN_16_KramerHill_G20CropInsurance1.pdf.

Wikipedia

{{cite report |last1=Kramer |first1=Berber |last2=Hill |first2=Ruth |title=Crop Insurance for Climate Resilience: Priorities for South Africa’s G20 Presidency |publisher=South African Institute of International Affairs |date=16 September 2025 |url=https://saiia.org.za/wp-content/uploads/2025/09/SAIIA_PN_16_KramerHill_G20CropInsurance1.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{kramer2025crop, author = {Kramer, Berber and Hill, Ruth}, title = {{Crop Insurance for Climate Resilience: Priorities for South Africa’s G20 Presidency}}, institution = {South African Institute of International Affairs}, year = {2025}, month = sep, url = {https://saiia.org.za/wp-content/uploads/2025/09/SAIIA_PN_16_KramerHill_G20CropInsurance1.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }