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Global agriculture insurance & agriculture reinsurance of Hannover re. Andreas Bronk . Agriculture Insurance Seminar Kyiv, July 8th, 2008. Trends. AGRIBUSINESS - A GLOBAL MEGATREND. Our global food supply is faced with enormous challenges. AGRIBUSINESS - A GLOBAL MEGATREND.

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Global agriculture insurance & agriculture reinsurance of Hannover re

Andreas Bronk

Agriculture Insurance Seminar

Kyiv, July 8th, 2008

agribusiness a global megatrend

Trends

AGRIBUSINESS - A GLOBAL MEGATREND

Our global food supply is faced with enormous challenges

AGRIBUSINESS - A GLOBAL MEGATREND

As population and income rise, the race is on to meet changing nutritional needs

  • (4) There is a need and a trend to invest, diversify and intensify agriculture
  • Foreign capital is moving into agricultural sector in emerging markets
  • Rich countries are interested in supplying high-quality food for world markets
  • Countries worldwide are interested in gaining food self-sufficiency
  • (1) Global population is growing by 210.000 people every day
  • Strongest population growth in Asia
  • People increasingly live in urban centres
  • Life expectancy is increasing

In 1985 meat consumption in China was 20 kilos per person per year, by 2000 it had increased to 50 Kg. and further increases are projected.

  • (3) The natural resources are limited
  • Land and water scarcity
  • Changing weather and increasing pollution
  • (2) High economic growth is bringing large part of population out of poverty (Mexico, Brazil, China, India, etc.) …
  • ...and also the food consumption pattern is changing, increasing the consumption of meat and healthy, high quality food (organic)

On the supply side, environmental pressures and increasing urbanization are putting further strain on already limited resources.

global trends affecting agriculture

Arable land

Food, Fuel, Feed, Forest, & Fiber Demand

Population growth

Time

Trends

GLOBAL TRENDS AFFECTING AGRICULTURE

GLOBAL TRENDS AFFECTING AGRICULTURE

Our global food supply is faced with enormous challenges

Value

Demand for food is growing by 30% until 2020

Every 7 years arable land of the size of Germany disappears due to desertification and urbanization

In 2015 the population will be about 7,1 bn

demand for meat sets big pressure on grain supply

Trends

DEMAND FOR MEAT SETS BIG PRESSURE ON GRAIN SUPPLY

Feed Conversion Efficiency

DEMAND FOR MEAT SETS BIG PRESSURE ON GRAIN SUPPLY

Large quantities of grain are required to produce meat

Cows in Sudan

An important characteristic of the increasing levels of incomes and expenditures is a changing food consumption pattern, and in particular, an increasing consumption of meat and milk products.

As a result the agriculture sector need to increase its level of feed grain production in full synchronization with the increasing demand for feed grains by the livestock sector.

world prices of food commodities are high

Trends

WORLD PRICES OF FOOD COMMODITIES ARE HIGH

WORLD PRICES OF FOOD COMMODITIES ARE HIGH

with consequences on demand for agriculture insurance

  • The surge in food prices was one of the main commodity highlights of 2007, sending our agriculture price index up a record 61% during the year largely due to increasing grain prices.
  • Wheat price gained in 2007 an unprecedented 86% as a result of strong demand by the developing world (even excluding China).
  • Insurance premium is pushed up due to an increase in insurable values.

Source: Der Spiegel 4/2008

global trends affecting agriculture1

Insurance demand

Value

Capital Investment

Intensification

Specialisation

Time

Trends

GLOBAL TRENDS AFFECTING AGRICULTURE

Higher efficiency required at every stage of the food supply chain - from farm to fork

GLOBAL TRENDS AFFECTING AGRICULTURE

Risk transfer is necessary to protect the capital investment in the agric. sector

global reinsurers are creating specialized teams

Reinsurers

GLOBAL REINSURERS ARE CREATING SPECIALIZED TEAMS

Hannover re is one of the few reinsurers with a specialized team in agronomy and veterinary science

GLOBAL REINSURERS ARE CREATING SPECIALIZED TEAMS

premium volume in 2007

Portfolio HR

PREMIUM VOLUME IN 2007

Worldwide Spread

PREMIUM VOLUME IN 2007

per region

HR Agro

Worldwide

  • World reinsurance premium volume = 1,63 bn USD World reinsurance premium in 2010 = 2 bn USD
premium development by regions

Portfolio HR

PREMIUM DEVELOPMENT BY REGIONS

Geographical spread

PREMIUM DEVELOPMENT BY REGIONS

In USD

Latin America

Asia

USA

West Europe

Germany

earned premium in 2007

Portfolio HR

EARNED PREMIUM IN 2007

Worldwide Spread

EARNED PREMIUM IN 2007

per Line of Business

Estimated Premium HR Group100 Mio USD

Worldwide

Estimated world reinsurance premium volume 2007 = 1,35 bn USD

development of premium per line of business

Portfolio HR

DEVELOPMENT OF PREMIUM PER LINE OF BUSINESS

DEVELOPMENT OF PREMIUM PER LINE OF BUSINESS

New product as Multi Peril Crop Insurance growing

in m EUR

Figures correspond to the premium of TD31 – Agro only.

aggregates control

Aggregates

AGGREGATES CONTROL

AGGREGATES CONTROL

New negative correlation with classical accumulation (EQ + Storm)

Even if there is no accumulation with other branches, it is of big importance to keep control of aggregates

public private partnership 1

"PPP"

PUBLIC - PRIVATE - PARTNERSHIP (1)

PUBLIC - PRIVATE - PARTNERSHIP (1)

International organizations & Governments are interested in AGRO insurance

  • There is a clear development from Governments & International Organizations to provide risk-management instruments in agriculture through the private sector
    • Why?
      • Maintain alimentary security and thereby reduce the risk of social commotions, civil wars & riots
      • Maintain an international competitive agriculture
      • Provide modern (WTO-Compliant) risk management instruments
      • Effective deployment of funds
      • Effective and individual coverage of agricultural production against weather-related yield losses
      • High insurance penetration, available to all farmers
    • Where?
      • Multi Perils Crop Insurance Development -> France, Italy, Chile, Brazil
      • HR's meetings with the Ministry of Agriculture -> Colombia, El Salvador, Poland, Brazil
      • Training for insurance companies
      • World Bank -> Central America, Peru, Caribbean & Colombia
public private partnership 2

"PPP"

PUBLIC - PRIVATE - PARTNERSHIP (2)

PUBLIC - PRIVATE - PARTNERSHIP (2)

International organizations & Governments are interested in AGRO insurance

  • Insurance companies' role
    • Assume liability
    • Product development and innovation
    • Active underwriting, monitoring, loss assessment and claims handling
    • Cooperation with government, associations and organizations
  • Hannover re's role
    • Knowledge transfer from other markets
    • Active support in development and establishment
    • Tailor made reinsurance concepts / capacities
  • Efficient handling of agricultural insurance cover thanks to special agricultural insurance know-how
outlook

"PPP"

OUTLOOK

Perspectives

OUTLOOK

Large potential to expand agricultural insurance

Insured

Under insured

Not insured

Not insurable

projection

now

potential in emerging markets

"PPP"

POTENTIAL IN EMERGING MARKETS

POTENTIAL IN EMERGING MARKETS

Agriculture insurance premium 2003 = 5,5 billion USD2007 = 8,0 billion USD

Agricultural output2003 = 1,5 Trillion USD2007 = 2,5 Trillion USD

  • If governments and insurers adopt appropriate initiatives to bring insurance penetration in the emerging markets to levels commensurate with more developed economies, the size of the world agricultural insurance market could reach USD 15 bn
insurance penetration in agricultural sector

Perspectives

INSURANCE PENETRATION IN AGRICULTURAL SECTOR

INSURANCE PENETRATION IN AGRICULTURAL SECTOR

Agriculture insurance premium as % of agriculture GDP

potential to grow

Perspectives

POTENTIAL TO GROW

POTENTIAL TO GROW

Focus

Focus

Focus

Focus