Southeast Asia is exploring the creation of a regional Agricultural Risk Finance Facility (ARFF), aimed at bolstering the region’s agricultural sector against the increasing threat of climate shocks. The initiative, led by the Southeast Asia Disaster Risk Insurance Facility (SEADRIF) in collaboration with the Food and Agriculture Organization (FAO), involves six ASEAN countries and seeks to enhance the sector’s financial resilience.
This proposal was discussed during the 10th-anniversary event of the ASEAN Climate Resilience Network (CRN) in January 2025. Regional stakeholders and government representatives agreed to explore pathways for establishing the Southeast Asia ARFF as a sectoral mechanism under SEADRIF, with funding support from the Green Climate Fund (GCF).
Southeast Asia’s agrifood systems are facing mounting risks due to climate change, which threatens the livelihoods of over one-third of the workforce dependent on agriculture and impacts more than 10% of the region’s GDP. Despite its significance, only 3% of global climate finance is directed toward the agricultural sector. This stark disparity underscores the urgent need for a transformation in how climate risks in agriculture are managed.
The SEADRIF media release highlighted that while Southeast Asian countries have pioneered innovative agricultural solutions to mitigate climate impacts, scaling these actions remains challenging. Key obstacles include expanding protection against climate shocks, improving accessibility for underserved populations, and addressing the affordability of premiums for insurance.
The proposed regional risk finance facility aims to overcome these challenges by improving access to data, risk models, and specialized expertise. By reducing transaction costs and enhancing access to both domestic and international insurance and reinsurance markets, the initiative intends to lower premium costs and ensure more equitable cost-sharing between insurers and public support.
A regional approach could offer multiple benefits to participating countries, including reduced premium costs through a diversified regional pool, economies of scale, and stronger negotiating power. Additionally, the streamlined market access would reduce transaction times and costs, enabling governments to offer better insurance products and conditions through centralized technical expertise.
The regional facility would also support the development of innovative insurance products by providing joint access to testing and implementation of new technologies. Furthermore, a member-owned facility would ensure greater budget and price stability, helping smooth insurance prices over market cycles.
Looking ahead, SEADRIF and FAO plan to conduct a pre-feasibility assessment in the coming months. This study will assess gaps, needs, and potential funding flows while aligning with the vision and objectives of participating countries. The outcome of the assessment is expected to inform and unlock critical climate finance investments aimed at strengthening the resilience of Southeast Asia’s agricultural sector in the face of climate challenges.
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