Traditional insurance in agriculture development
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Managing Risk in Financing Agriculture FAO - World Bank – AFRACA April 1-3, 2009 Johannesburg, RSA. Traditional Insurance in Agriculture Development. Dr. Erich Kasten ARC – Agriculture Reinsurance Consultants Switzerland. Traditional Insurance in Agriculture Development.

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Traditional insurance in agriculture development

Managing Risk in Financing Agriculture

FAO - World Bank – AFRACA

April 1-3, 2009 Johannesburg, RSA

Traditional Insurance inAgriculture Development

Dr. Erich KastenARC – Agriculture Reinsurance Consultants

Switzerland


Traditional insurance in agriculture development1

Traditional Insurance in Agriculture Development


Agriculture insurance market

Agriculture Insurance Market

Global Market estimated at USD 10 billion (2008)


Agriculture insurance market traditional index products

Agriculture Insurance MarketTraditional & Index Products

Global Agriculture Insurance Market est. USD 10 billion (2008)


Traditional insurance products

Traditional Insurance Products

Global Agriculture Insurance Market est. USD 10 billion (2008)


Damage based products

Damage based Products

  • Fire

  • Hail

    • Hail plus Named Perils

  • Named Perils

    • Frost

    • Flood

    • Windstorm

    • Other perils


Yield guarantee based products

Yield Guarantee based Products

  • Multi Peril Crop Insurance (MPCI)

    • Individual farm based policy

    • Area based policy

  • Crop Revenue Insurance

    • Yield and/or

    • Market Price


Multi peril crop insurance underwriting requirements

Multi Peril Crop InsuranceUnderwriting Requirements

  • Specialist Underwriting

  • Quality farm risk information

    • Actuarial based risk pricing

    • Insurance infrastructure at grass-root level

  • Skilled agriculture producer

  • Strong Government support

    • Premium subsidy

    • Extension Service

    • Supply of available data

Complex Underwriting Process


Multi peril crop insurance common underwriting problems

Multi Peril Crop InsuranceCommon Underwriting Problems

  • Individual farm yield guarantee

    • Yield data quality

    • Farm management assessment

    • Underwriting & Risk monitoring cost

  • Asymmetric risk information

    • Adverse selection

    • Moral hazard

  • High premium cost

    • Low market penetration

    • Premium subsidy required

High Operating Requirements


Multi peril crop insurance

Multi Peril Crop Insurance

Only viable with strong

Government support


Insurance requirement farmer

Insurance Requirement - Farmer


Insurance requirement bank

Insurance Requirement - Bank


Product requirement insurer

Product Requirement - Insurer


Limited aligned interest

Limited aligned Interest


Holistic insurance approach

Holistic Insurance Approach


Agriculture development

Agriculture Development


Most important key drivers

Most Important Key Drivers


Holistic agricultural development

Holistic Agricultural Development

State

Full cooperation isrequired from all stakeholder for

successful & holistic agricultural development


Conclusions 1 2 traditional insurance in agriculture development

Conclusions (1/2)Traditional Insurance in Agriculture Development

  • facilitates agriculture development

  • act’s as catalyst

  • has shortcomings

  • is expensive

  • requires skilled insurance operations


Conclusions 2 2 traditional insurance in agriculture development

Conclusions (2/2)Traditional Insurance in Agriculture Development

  • Access to resources & markets vital

  • Education & know-how transfer central

  • Government support and holistic agriculture development strategy is needed for developing countries


Thank you for your attention

Thank youfor your attention

Dr. Erich Kasten

Agriculture Reinsurance Consultants GmbH

Switzerland

[email protected]


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