Jakarta—New data from the Financial Services Authority (OJK) shows that potential economic losses in the agriculture sector due to climate change by 2024 will reach IDR 19.94 trillion, a significant increase over the past five years. This figure alarms the government to immediately take mitigation measures to protect the agricultural sector and support national food self-sufficiency.
In the soft launching of the Agricultural Insurance Development Roadmap 2025-2030, Monday, 24 March, Head of OJK’s Insurance, Guarantee and Pension Fund Regulatory and Development Department, Djonieri, emphasised that insurance solutions must be implemented immediately to reduce the risks posed by natural disasters.
“If we compare with other countries, such as Mexico, which has implemented catastrophic insurance, we should also be able to expand insurance coverage for farmers, ranchers, and fishermen,” said Djonieri.
Djonieri added that agricultural parametric insurance products are the right choice because they can provide protection against the risk of natural disasters, such as drought, which often hit the agricultural sector. According to him, this approach is important to anticipate the increasing losses, which in previous years were recorded at Rp11.20 trillion in 2020, rising to Rp13.40 trillion, Rp15.59 trillion, Rp17.77 trillion, and finally reaching Rp19.94 trillion in 2024.
In addition, Djonieri emphasised that this insurance policy aligns with President Prabowo’s Asta Cita vision and mission of realising food self-sufficiency while opening up opportunities for the insurance industry in Indonesia to grow. “The government should expand insurance coverage for the agricultural sector. He explained that this will be a very promising market deepening for the insurance industry, especially compared to other countries such as India and Mexico,” he explained.
Djonieri also said that insurance inclusion and literacy are still major challenges, given that agricultural insurance coverage in Indonesia is currently mostly concentrated in Java, around 80-90%.
“If farmers do not get adequate education, they will not realise the benefits of agricultural insurance that can protect them from increasingly extreme climate risks,” he concluded.
With increasing economic losses due to climate change, OJK urges the government to immediately implement parametric insurance in the agricultural sector as part of the mitigation strategy, to provide broader protection and improve national food security. (Hartatik)
Banner photo: Image generated by OpenAI’s DALL·E via ChatGPT (2024)
