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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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 Development


Agriculture Insurance Market

Global Market estimated at USD 10 billion (2008)


Agriculture Insurance MarketTraditional & Index Products

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


Traditional Insurance Products

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


Damage based Products

  • Fire

  • Hail

    • Hail plus Named Perils

  • Named Perils

    • Frost

    • Flood

    • Windstorm

    • Other perils


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 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 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

Only viable with strong

Government support


Insurance Requirement - Farmer


Insurance Requirement - Bank


Product Requirement - Insurer


Limited aligned Interest


Holistic Insurance Approach


Agriculture Development


Most Important Key Drivers


Holistic Agricultural Development

State

Full cooperation isrequired from all stakeholder for

successful & holistic agricultural 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

  • Access to resources & markets vital

  • Education & know-how transfer central

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


Thank youfor your attention

Dr. Erich Kasten

Agriculture Reinsurance Consultants GmbH

Switzerland

[email protected]


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