EU co-financing promotes sustainable insurance solutions in Paraguay

Co-financing from the European Commission will enhance BMZ’s support of Paraguay in the promotion of sustainable livestock production. New components focus on innovative insurance approaches along corresponding value chains.

The European Union (EU) Delegation in Paraguay and the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) started implementing a co-financing agreement in Paraguay, April 1st 2018. The co-financing agreement was signed and celebrated at a high-level event in Asunción by Dr. Marcelo González, Paraguay’s Deputy Minister for Livestock and Paolo Berizzi, Ambassador of the European Union to Paraguay and Hans-Joachim Cordes, First Secretary of the German Embassy in Asunción. At the event, Hugo Idoyaga, President of the Paraguayan National Animal Health and Quality Service, and representatives of the private sector emphasized the importance of small and medium-sized producers for sustainable development in the rural areas of Paraguay. Through this co-financing partnership, the EU and Germany jointly support Paraguay’s development with products and services equivalent to EUR 4.15 million.

Innovative insurance approach

The co-financing will also make a significant contribution to expanding the InsuResilience Global Partnership, which was initiated at the 23rd world climate conference in Bonn in November 2017. The Global Partnership’s objective is to support governments and households through climate and disaster risk management to better and faster react after a natural catastrophe. Thereby the costs of such a disaster – especially for poor and vulnerable households – is minimized. The Global Partnership builds on the InsuResilience Initiative formed in 2015 by the G7 countries in Elmau. The goal of the initiative is to reach an additional 400 million poor and vulnerable people in developing countries with climate risk insurance by 2020. In Paraguay, the initiative’s target group of poor and vulnerable groups includes up to 480,000 households as well as micro, small and medium-sized enterprises in rural Eastern Paraguay that may be reached by insurance. Insurance has the potential to strengthen the investments in sustainable and resilient small animal production of the existing EU programme by protecting farmers’ businesses against extreme weather events. In addition, the partnership aims at strengthening the understanding of risk and risk management approaches and thus benefits up to 2 million rural people whose livelihoods depend on agricultural production.

German development cooperation as groundwork

The co-financing partnership builds on robust implementation arrangements established by the German development cooperation in Paraguay. It fits into a broad cooperation agreement with the Ministry of Agriculture. The joined programme is implemented by the bilateral project Strengthening resilience of the vulnerable population in the rural area of Eastern Paraguay (FortaleceRES) together with the implementing team of the global project InsuResilience. It has two workstreams to foster sustainable insurance solutions: 1) the programme team assists the Ministry of Social Affairs (Secretaría de Acción Social) in conceptualizing a catastrophic risk insurance product that targets beneficiaries of its conditional-cash transfer program, and it supports the design of weather index-based insurance for borrowers of the agricultural credit institute Crédito Agrícola de Habilitación, 2) an embedded expert team advises the insurance regulator (Superintendencia de Seguros) in designing inclusive insurance regulations, and assists local partners with the design of inclusive insurance solutions. Pursuing these two approaches together promises higher development impacts.

Inclusive insurance to support sustainable development of agriculture

Agriculture is key to the livelihoods of Paraguay’s seven million inhabitants with a share of approximately 25% of GDP and 40% of the population working in the sector. The programme focuses on smallholder agriculture, which has an important social role and is key for food security. The basis to secure livelihoods in the rural sector is to apply sustainable agricultural practices and improve its competitiveness through the integration into national and international value chains and markets along with comprehensive risk management. According to the EMDAT database, floods, storms and droughts are the most common hazards in Paraguay. The average annual loss for floods alone amounts to approximately USD 92 million. Given Paraguay’s high exposure to these meteorological hazards, access to climate risk insurance is essential for holistic risk management strategies and sustainable agricultural development.

The programme focuses on comprehensive risk management strategies, including sustainable insurance solutions. These strategies aim to enhance agricultural productivity, rural development and the resilience of Paraguay’s rural households.