Crops and Livestock Insurance Practices in Nepal

Abstract

The objective of this paper is to discuss the micro insurance practices in Nepal, review the existing Crops and Livestock Insurance Directives, 2013 (CLID) and regulatory framework in Nepal. The paper has prepared on the basis of secondary data. Available literature and relevant documents were reviewed and analyzed to arrive in to conclusion. We have discussed 7 different insurance schemes in practice in different parts of country and further suggested appropriate delivery model on the basis of existing resources and structure.

There are two basic approach of agriculture insurance: activity based approach and institution approach. Activity base approach allows to all commercial and non commercial insurers to sell the agriculture related insurance products continue with the products which are already sold. In contrast, in institution base approach, only agricultural insurance product is sold. In Nepalese context, institutional base approach would be better in different grounds. First, Nepalese commercial insurers have not financial and technical capabilities to cover the large agriculture sector. They have focused their institutional network in cities and semi urban area. Lack of reinsurance support discourages them to enter the agriculture insurance.

Obviously, challenges are ahead but these can be minimized through strong regulatory framework, clear vision and policies, government commitment and strong motivation of insurer. Basically challenges can be pointed out as institutional challenge, technical challenge, operational challenge, geo-climatic challenge, diversity in risk exposure, lack of trustworthiness, high operating cost are some challenges may face by the all stakeholders of the agriculture insurance industry.

Keywords: Agriculture Insurance, Institution based approach, Public Private Partnership

JEL Classification: G22