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January 2013

Agro Insurance Info Worldwide

Worldwide, stakeholders are striving for a sustainable agricultural insurance system

Dear Reader
Agricultural production is a key topic around the globe, and so is agricultural insurance. Climate change and an increasing world population that needs to be fed are adding pressure to the need to find solutions to make our sector sustainable. Let us invite you to find out what is going on in the agricultural insurance and reinsurance world ...

USA: Important facts about the 2012 US drought – A reinsurer's perspective

December 2012. Latest estimates indicate that the loss amount caused by the US drought in 2012 is likely to be in the range of US$ 15-17bn, thus making it by far the largest agricultural loss event ever in terms of loss payments. The insurance and reinsurance industry will bear about US$ 11-13bn of the total, the remainder being covered by the government. Although the event itself is comparable to the drought in 1988, only US$ 1bn were paid out by the industry at the time, with an additional US$ 3bn in disaster aid from the government.

What has changed in today's (re)insurance world? To begin with, commodity prices for corn and soybeans, and hence the sum insured, have more than doubled. Secondly, insured acreage has increased from a market penetration of 20% in 1988 to 85% today. And finally, the coverage provided by the insurance products has been enhanced – for instance, from yield to revenue.

We estimate that reinsurers will have to bear up to three-quarters of the privately paid loss amount for the 2012 event. This shows that the insurance risk capital with which such large market penetration is achieved is only invested where a reliable, transparent and financially supported insurance framework such as that of the USA is available.

This well thought-through agricultural insurance system stabilises the agricultural sector and hence the national economy by means of a number of smart insurance mechanisms, whilst securing a contribution from the international insurance industry.

Brazil: Major stakeholders convene to discuss the stagnation of the national crop insurance market and its way to growth

December 2012. In Brazil, the first "seminário de seguro rural" was conducted as a result of a joint effort of ESALQ university and Munich Re. Representatives of the ministries (MAPA, MDA) responsible for the public support of agricultural insurance took advantage of this platform to explain their goals while farmers' representatives stated their requirements. Current governmental support measures reveal that farmers' needs are not fully met. Some of the main issues discussed were the co-financing of premiums and effective regulation. The next challenge for the seminar, which is held annually, will be how best to design such mechanisms for Brazil.

We thank all the participants for their active involvement and for making this seminar a success.

Learn more about the seminar's outcome (resp. Vitor press note)

South Africa: Minister of Finance links the value of agricultural insurance to finance as a means of achieving sustainable agricultural development

October 2012. A workshop on "Agriculture Development Finance" was hosted by the Agricultural Business Chamber. The Minister of the National Treasury, Pravin Gordhan, stated in his keynote speech that the availability of funds was not the problem in getting agricultural development off the ground. The challenge was how to spend the money. The chairperson of the South African Insurance Association (SAIA) suggested considering an approach tied to production risks as the backbone for loans and hence for sustainability and increased productivity. Thanks to the momentum thus built, the Agriculture Ministry (DAFF) is now working together with the National Treasury (NT) on a comprehensive framework that will provide more farmers with agricultural insurance.

more information about the Workshop Agriculture Development Finance (agbiz)

Thus – all around the globe, governments and industry are seeking solutions to threats our national sectors are facing.

If you wish to send us some comments, please do not hesitate to contact us via the contact button. Please also let us know if you prefer to receive this information in your favourite language (Spanish, Portuguese, Russian, German) rather than in English. Please respond to the Munich Re Agro Team.

SystemAgro@munichre.com

We hope you have enjoyed reading Agro Insurance Info Worldwide,

Your Munich Re Agro team

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