Jakarta. The World Bank's financing arm for the private sector and specialist reinsurance company Reasuransi Maipark Indonesia have agreed to develop insurance products to help local farmers mitigate weather-related risks.

Under the agreement, the International Finance Corporation (IFC) and Maipark will establish insurance schemes that pay out benefits to farmers if a weather event exceeds levels in a predetermined index — which will measure rainfall levels, temperatures, wind speeds and crop yields.

The new index-based scheme is expected to provide cheaper and less complicated insurance benefits to farmers in the event of a natural disaster.

Last year, the government launched a nationwide agriculture insurance program to protect local farmers against flood, drought or pest infestations.

"The national program to achieve food security and improve people's productivity will need to be supported by all parties, including by us," Maipark president director Yasril Y. Rasyid said on Thursday (27/04).

"The insurance industry can support this program by providing protection against risks faced by agricultural stakeholders," he said.

The government aims to reach self-sufficiency in staple foods like rice, corn and beef by 2019 by developing new agricultural infrastructure and providing subsidies to local farmers to purchase fertilizers and seed at reduced rates.

IFC will support Maipark in working with local companies to develop, sell and bundle insurance products and agriculture loans to mitigate weather-related risks such as droughts, floods, and hurricanes for farmers, agribusinesses and banks.

"The region's changing climate has made agricultural insurance essential to protect local businesses and strengthen industries so they become resilient to new weather patterns," IFC country manager for Indonesia and Malaysia Azam Khan said recently.

The project is part of IFC's Canada-funded Indonesia Agribusiness Program aimed at promoting inclusive and sustainable rural growth.

IFC and Maipark had previously tied another agreement in 2013 to develop similar disaster mitigation products that protect banks who provide loans to small and medium enterprises from losses related to earthquakes and other disasters.