Andreas Bronk Agriculture Insurance Seminar Kyiv, July 8th, 2008 Global agriculture insurance & agriculture reinsurance of Hannover re

Andreas Bronk

Agriculture Insurance Seminar Kyiv, July 8th, 2008

Global agriculture insurance & agriculture reinsurance of Hannover re

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Trends Reinsurers Portfolio HR Aggregates "PPP" Perspectives

(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)

(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

(3) The natural resources are limited • Land and water scarcity• Changing weather and increasing pollution

(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

Trends

AGRIBUSINESS - A GLOBAL MEGATRENDAs population and income rise, the race is on to meet changing nutritional needs

Our global food supply is faced with enormous challenges

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.

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

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GLOBAL TRENDS AFFECTING AGRICULTUREOur global food supply is faced with enormous challenges

Arable land

Food, Fuel, Feed, Forest, & Fiber Demand

Population growth

Time

Value

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 food is growing by 30% until 2020

Trends

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Fish 1,2

Poultry 2,5

Pork 3,6

Sheep and Cattle 8

Kilos of feed required to produce one kilo of body mass:

Cows in Sudan

DEMAND FOR MEAT SETS BIG PRESSURE ON GRAIN SUPPLY Large quantities of grain are required to produce meat

Feed Conversion Efficiency

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.

Trends

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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

WORLD PRICES OF FOOD COMMODITIES ARE HIGHwith consequences on demand for agriculture insurance

Trends

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Insurance demand

Value

Specialisation

Time

Intensification

Capital Investment

GLOBAL TRENDS AFFECTING AGRICULTURERisk transfer is necessary to protect the capital investment in the agric. sector

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

Trends

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Group Premium (in m USD)Number of specialized

staff members

Münchener Rück (50% of the premium in USA)

600 28

Swiss Re 300 18 SCOR (incl. Converium) 120 7 Hannover Re (whole Group) 100 5 Partner re 100 7 Paris Re 40 3 Sum of major six reinsurers 1.260

93% of total reinsurance premium

Reinsurers

GLOBAL REINSURERS ARE CREATING SPECIALIZED TEAMS Hannover re is one of the few reinsurers with a specialized team in agronomy and veterinary science

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East Europe2 %

West Europe16 %

Australia + NZ5 %

Africa4 %

North America (incl.

Bloodstock)46 %

Asia12 %

Latin America15 %

West Europe14%

East Europe4%

Australia + NZ10%

Africa6%

Asia14%

Latin America29%

North America (inkl. Bloodstock)

23%

Worldwide HR Agro

World reinsurance premium volume = 1,63 bn USD World reinsurance premium in 2010 = 2 bn USD

PREMIUM VOLUME IN 2007per region

Worldwide Spread

Portfolio HR

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In USD

Latin America

Asia

West Europe

USA

Germany

PREMIUM DEVELOPMENT BY REGIONSGeographical spread

Portfolio HR

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Hail23%

Multi Peril Crop Insurance

48%

Livestock & Aquaculture

12%

Bloodstock9%

Forestry4%

Other4%

Hail28%

Livestock & Aquaculture

14%

Bloodstock9%

Forestry7%

Other2%

Multi Peril Crop Insurance

40%

Worldwide Estimated Premium HR Group100 Mio USD

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

EARNED PREMIUM IN 2007per Line of Business

Worldwide Spread

Portfolio HR

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0

5

10

15

20

25

Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08

Multi Peril Crop Insurance Hail Livestock & Aquaculture Forestry

in m EUR

DEVELOPMENT OF PREMIUM PER LINE OF BUSINESSNew product as Multi Peril Crop Insurance growing

Figures correspond to the premium of TD31 – Agro only.

Portfolio HR

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Trends Reinsurers Portfolio HR Aggregates "PPP" PerspectivesAggregates

Territory PerilAggregates im PML (in

Mio. EURs)Number of contracts

Argentina Fire 1,650 4

Hail 29,570 22

Multiperil 7,299 32

Australia Fire 12,121 3

Multiperil 20,670 15

Mexico Animal Diseases 1,046 3

Drought 2,326 2


Chile Aquaculture 7,990 5

Fire 1,710 10

Multiperil 1,594 4

Brazil Fire 1,108 6


South Africa Animal Diseases 0,501 1

Fire 2,374 3

Multiperil 6,527 7

2008

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

AGGREGATES CONTROLNew negative correlation with classical accumulation (EQ + Storm)

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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

"PPP"

PUBLIC - PRIVATE - PARTNERSHIP (1)International organizations & Governments are interested in AGRO insurance

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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

PUBLIC - PRIVATE - PARTNERSHIP (2)International organizations & Governments are interested in AGRO insurance

"PPP"

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OUTLOOKLarge potential to expand agricultural insurance

Perspectives

now

Insured

Under insured

Not insured

Not insurable

projection

"PPP"

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Emerging Markets

70 %

Developed countries

30 %

Developed countries;

80%

Emerging markets; 20%

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

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

POTENTIAL IN EMERGING MARKETS

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

"PPP"

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0,000%

0,100%

0,200%

0,300%

0,400%

0,500%

0,600%

0,700%

0,800%

0,900%

as % of agriculture GDP

Industrial economies Emerging markets Latin America Eastern Europe Asia Middle East

INSURANCE PENETRATION IN AGRICULTURAL SECTORAgriculture insurance premium as % of agriculture GDP

Perspectives

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POTENTIAL TO GROW

Perspectives

Documents

Andreas Bronk Agriculture Insurance Seminar Kyiv, July 8th, 2008 Global agriculture insurance & agriculture reinsurance of Hannover re