Swiss Reinsurance Company Limited (Swiss Re), a global reinsurer based in Zurich, recently announced the launch of an index-based insurance program in partnership Vietnam Agribank Insurance Joint Stock Company (ABIC), the insurance arm of Vietnamese agricultural bank Agribank. The program will insure microloans to rice farmers in 10 provinces in Vietnam.
The arrangement stipulates that ABIC will insure Agribank’s microloans to rice farmers in case they are unable to repay loans due to low crop yields. Payouts will be defined by an “area-yield index” that is based on weather data from the Vietnam’s Bureau of Statistics. In turn, ABIC will transfer this risk to Swiss Re and the Vietnam National Reinsurance Corporation (Vina Re).
Vietnam reportedly provides 20 percent of the global tradable rice surplus and is the world’s second largest exporter of the grain. Nguyen Van Minh, chairman and general director of ABIC, says “the insurance scheme will ensure Agribank can confidently offer rice loans and use potential payouts of the parametric insurance program to mitigate the impact of credit defaults resulting from poor harvests. With this solution, we can also in the future continue to sustain a key sector that provides a means of livelihood to more than 50 percent of Vietnam’s 86 million people [1].”
As of 2009, Agribank had 2,300 branches and transaction offices, over 35,000 employees and total assets of VND 470 trillion (USD 24.1 billion).
By John Howard-Smith, Research Associate
About Swiss Reinsurance Company Limited (Swiss Re): Swiss Reinsurance Company Limited (Swiss Re) was founded in Zurich, Switzerland, in 1863 to offer financial products that enable risk-taking. The company operates through offices in approximately 20 countries. As of September, 2010, Swiss Re reports total assets of USD 236 billion.
About Vietnam Agribank Insurance Joint Stock Company (ABIC): Vietnam Agribank Insurance Joint Stock Company (ABIC) is a subsidiary of Agribank, an agricultural bank in Vietnam that was founded in 2007 to insure individuals and organizations in Vietnam’s rural sectors that may not have access to traditional insurance. Along with Agribank and Agribank’s various other subsidiaries that offer insurance, ABIC has insured VND 5 trillion (USD 255 million) since its founding in 2007.
About Agribank: Agribank is a Vietnamese commercial bank founded in 1998 as the Agricultural Development Bank of Vietnam to provide loans for the industrialization and modernization of agriculture and other forms of rural economic development. Agribank is current head of the Asia-Pacific Rural and Agricultural Credit Association (APRACA), a regional association of finance and credit institutions that promotes cooperation and facilitates mutual exchange of information and expertise in the field of rural finance. As of 2009, Agribank had 2,300 branches and transaction offices, approximately 35,000 employees and total assets of VND 470 trillion (USD 24.1 billion).
[1] Swiss Re Press Release: “Vietnam’s rice farmers to get loss protection if yields fall; Swiss Re and ABIC deliver a first for world’s second largest rice exporter”, http://www.swissre.com/media/media_information/Vietnams_rice_farmers_to_get_loss_protection.html
MicroCapital’s Microfinance Universe profile: Swiss Reinsurance Company Limited (Swiss Re), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Swiss+Reinsurance+Company+Limited+(Swiss+Re)
MicroCapital’s Microfinance Universe profile: Vietnam Agribank Insurance Joint Stock Company (ABIC), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Vietnam+Agribank+Insurance+Joint+Stock+Company+(ABIC)
MicroCapital’s Microfinance Universe profile: Agribank, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Agribank
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