The Southeast Asia Disaster Risk Insurance Facility (SEADRIF) and the Food and Agriculture Organisation (FAO) have partnered with six ASEAN countries to explore pathways for establishing a Southeast Asia Agricultural Risk Finance Facility (ARFF).
On the sidelines of the 10th anniversary event of the ASEAN Climate Resilience Network (CRN) in January 2025, representatives from six ASEAN countries and regional stakeholders agreed to explore the development of the Southeast Asia ARFF as a potential sectoral mechanism under SEADRIF. The risk finance facility will have funding support from the Green Climate Fund (GCF).
According to a media release by SEADRIF, climate shocks are increasingly threatening Southeast Asia's agrifood systems, where more than one-third of the workforce depends on farming for their livelihood and the sector contributes over 10% of regional GDP. Despite the critical role of agriculture in ASEAN's economy and food security only 3% of global climate finance reaches this sector, which highlights an urgent need for transformation in managing climate risks.
Southeast Asian countries have piloted innovative and practical agricultural solutions to mitigate climate impacts. However, common challenges impede the scaling-up of climate actions, particularly in expanding protection against climate shocks to effectively support underserved populations.
Achieving this requires access to data, models, and specialised expertise to reduce transaction costs and streamline access to domestic and international insurance and reinsurance providers. Additionally, the affordability of premiums and the right cost-sharing between the insured and public support remain key concerns.
Regional collaboration in scaling up agriculture risk finance can provide concrete benefits to participating countries. These would include reduced premium costs through a regional pool from regional diversification, economies of scale, and better negotiating power.
Also, reduced transaction time and costs from a simplified go-to-market process for governments with improved products and conditions through centralised technical expertise in placement and market negotiations will be another noteworthy feature of the facility.
With increased protection for difficult-to-insure exposures or perils, more innovative products through joint access to testing and implementing new technologies and products will be enabled.
With increased budget and price stability from a member-owned facility will be able to help smooth insurance prices over market cycles. To support such areas, a regional facility will also provide access to world-leading knowledge, data, tools, and technical services and facilitate regional experience sharing.
According to the media release in the coming months, SEADRIF and FAO will conduct a pre-feasibility assessment and work with countries to align on vision and objectives. The study will assess gaps, needs, and appropriate implementation arrangements and funding flows to unlock and inform climate finance investments into this critical area of strengthening the resilience of agriculture in the region.