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April 2015

Munich Re Agro Insurance Info

Everything new? Innovation meets long-term expertise

Dear Reader,

New findings in the field of climate-change models explain the extremes of summers and winters experienced in recent years all over the globe. These insights and the observation of dedicated markets worldwide keeps our community busy. If you have any thoughts on this, in reply to or enhancing the topics below, please let us know and discuss them with us.

Munich: About us – Munich Re Agro and weather insurance business merge under new management

March 2015. Munich Re Agro and the Munich Re weather insurance business unit have merged under new management. Rupert Flatscher, who formerly headed the Risk Trading Unit for Munich Re, has assumed responsibility for the new division, which remains under the same board member Thomas Blunck. Back in 2013, Munich Re acquired a strong weather and commodity risk team based in Houston, USA. This Munich Re Trading LLC (MRTL) team will now be united with the agriculture reinsurance business. The new division will combine all our agricultural insurance expertise worldwide with weather and commodity structuring knowledge, coupled with data analytics. This setup is the best starting point for the challenge of when innovative approaches have to join up with long-term expertise in the field of complex index structures, and of public-private agricultural insurance systems and products, for the benefit of both insurance clients and farmers.

Worldwide: Quasi-stationary weather patterns are very likely a result of climate change

February 2015. Between cold snaps and heat waves, droughts and heavy rain that is either unseasonable or of unusual long duration, the feeling is growing almost everywhere in the world that the usual weather patterns have gone haywire. The winter of 2013/14 is a good example: whereas it was almost non-existent in central Europe, the eastern regions of North America and Japan experienced record low temperatures and snowfalls. In California there was too little winter precipitation to avert the drought, while in Great Britain it rained constantly. What is going on?

Meteorologists are cautious about offering quick explanations. But they believe that one striking fact over the last few years is that weather patterns have persisted for unusually long periods, often weeks at a time, and that this can have extreme consequences.

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France: The Ministry of Agriculture changes its policy for agriculture insurance products towards catastrophe cover for all producers

February 2015. From the season 2015/6, current multi-peril insurance covers will be replaced by the contrat socle. The main goal of this policy is to increase market penetration in all crops. Higher premium subsidies are to be awarded to cat products than to non-cat covers. The contrat socle is a genuine cat product with 30% minimum deductible and franchise (previously 25%). Above that, sums insured will no longer be based on selling prices but on production costs that are to be determined by crop and region. As a consequence, publicly supported coverages of e.g. quality losses and replanting expenses will be discontinued. This will lead to a considerably lower coverage level. The attendant issue of increasing the budget for premium co-finance, which is crucial for achieving a higher market penetration, still needs to be addressed.

To serve the market further on, insurers will offer complementary products to bridge the gap. This is welcomed by farmers to cover their risk transfer demand and by insurers to drive innovation. However, there are challenges that come along with it: Are complementary products to be bought without public co-finance? Do private products serve the insurer as a major client retention tool for cross-selling the publicly co-financed products, and hence might they be underpriced over time. This has been and is still being experienced in other countries.

More information

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We hope you have enjoyed this issue of Munich Re Agro Insurance Info Worldwide.
Your Munich Re Agro Team


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