Phnom Penh: The InsuResilience Investment Fund (IIF), managed by leading impact investment manager BlueOrchard Finance Ltd has acquired a minority share in general and life insurance firm Forte Insurance (Cambodia) - as the company aims to grow Cambodia’s agricultural insurance market.
The InsuResilience Investment Fund (IIF) was set up on behalf of the German government by KfW to contribute to the adaptation to climate change by improving access to and the use of insurance in developing countries.
The fund has a specific objective to reduce the vulnerability of low-income households as well as small and medium-sized enterprises.
Forte a pioneer in Cambodia’s agri-insurance sector
One of the key areas the investment aims to address is to support the expansion of Forte’s agriculture insurance offering. The Cambodian government, along with development partners and the private sector, have identified agri-insurance as a vital development tool to protect the pillar sector against increasing climate change concerns.
According to government estimates, the agriculture sector accounts for 22 percent of Cambodia's GDP, and employs about 3 million people. Under the Cambodian government’s Agricultural Development Policy 2021-2030, the ministry has a long-term vision to modernize the agricultural sector, as well as increase climate resilience in the sector and reduce climate impact.
Agri-insurance is also considered to promote high production by ensuring financial security for farmers and allowing more investment in their businesses. In response, Forte has recently launched a pilot in Weather Index Crop Insurance (WICI) with the Cambodian Ministry of Economy and Finance and Asian Development Bank with the aim to reach over 1.8 million farmers by 2026.
WICI is a different approach to managing weather and climate risk using a weather index, such as rainfall, to determine payouts. This form of insurance allows for faster and less complicated claim payouts compared to typical conventional crop insurance that protects against either the loss of their crops due to natural disasters, such as hail, drought, and floods.
Other initiatives include working with the farming community to build up aquaculture insurance expertise, supporting the growth of key crops such as mango, banana, cashews, vegetables and rubber, and partnering with micro-finance insurers to provide and protect financial solutions to farmers.
Some of the barriers to overcome in the local market include lack of education and trust from farmers, as well as limited infrastructure of weather forecasting which makes it difficult to predict outcomes.
Mr Chamroeunrith Youk, Group CEO of Forte Insurance, commented: “Agriculture is an important component of our economy. Forte aims to do our part to support farmers with insurance that protects against financial risks caused by uncertain weather and crop damage, so that our agriculture industry continues to thrive in these uncertain times.”
Agricultural insurance key for modernizing the sector
Speaking about the new investment, Thibaud Ponchon, Investment Director Asia at BlueOrchard said: “Agriculture insurance is an effective risk mitigation tool to protect small scale farmers from severe losses caused by natural disasters.”
“We are excited to partner with the market leader to drive the penetration of agriculture insurance products in Cambodia and enhance the adaptation of people with low and middle income to climate change,” he added.
According to the company, the IIF will appoint a nominee to Forte’s Board of Directors, with the proceeds of the investment to be used to further support the expansion of Forte’s agriculture insurance offering, extending the firm’s outreach to low and middle-income groups, as well as its insurtech initiatives and to increase the firm’s risk capital.
Charles Cheo, Executive Chairman and Co-Founder of Forte also commented: “We look forward to working with BlueOrchard’s team and leveraging their experience in the global insurance sector to develop the regional market together. Over the years we have been following the successful investments of BlueOrchard managed funds in the microfinance sector in the region.”
“We are confident that the partnership with BlueOrchard and IIF is ideal for a successful journey and that together we can extend such success into the insurance sector for the rural population in the Mekong area,” he added.