Singapore, 25 February 2025 – The Southeast Asia Disaster Risk Insurance Facility (SEADRIF) and the Food and Agriculture Organization of the United Nations (FAO) have partnered with six ASEAN countries to explore pathways for establishing a Southeast Asia Agricultural Risk Finance Facility (ARFF).
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.1 Despite the critical role of agriculture in ASEAN's economy and food security, only 3% of global climate finance reaches this sector2, highlighting 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 specialized 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, such as reduced premium costs through a regional pool from regional diversification, economies of scale, and better negotiating power; reduced transaction time and costs from a simplified go-to-market process for governments; improved products and conditions through centralized technical expertise in placement and market negotiations; increased protection for difficult-to-insure exposures or perils; more innovative products through joint access to testing and implementing new technologies and products; and increased budget and price stability from a member-owned facility that can help smooth insurance prices over market cycles. To support such areas, a regional facility should also provide access to world-leading knowledge, data, tools, and technical services, and facilitate regional experience sharing.
On the sidelines of the 10th anniversary event of the ASEAN Climate Resilience Network (CRN), representatives from six ASEAN countries and regional stakeholders, with funding support from the Green Climate Fund (GCF), agreed to explore the development of the Southeast Asia Agricultural Risk Finance Facility as a potential sectoral mechanism under SEADRIF. As the key disaster risk finance platform mandated by ASEAN+3 finance ministers to enhance resilience across Southeast Asia, including through agricultural risk finance, SEADRIF will explore ways to provide the operational home for implementing such a Facility.
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.
1. GCF Readiness Proposal, Agriculture Sector Readiness for enhanced climate finance and implementation of Koronivia Joint Work on Agriculture priorities in Southeast Asia www.greenclimate.fund/sites/../fao-thailand-multicountry.pdf
2. 2024 FAO