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Traditional Insurance inTraditional Insurance inAgriculture DevelopmentAgriculture Development
Dr. Erich KastenDr. Erich Kasten
ARC – Agriculture Reinsurance ConsultantsARC – Agriculture Reinsurance Consultants
SwitzerlandSwitzerland
Managing Risk in Financing AgricultureManaging Risk in Financing AgricultureFAO - World Bank – AFRACA FAO - World Bank – AFRACA
April 1-3, 2009 Johannesburg, RSAApril 1-3, 2009 Johannesburg, RSA
Traditional Insurance in Agriculture Traditional Insurance in Agriculture DevelopmentDevelopment
Agriculture Insurance MarketAgriculture Insurance Market
Global Market estimated at USD 10 billion (2008)Global Market estimated at USD 10 billion (2008)
Agriculture Insurance MarketAgriculture Insurance Market Traditional & Index ProductsTraditional & Index Products
Global Agriculture Insurance Market est. USD 10 billion (2008)
Traditional Insurance ProductsTraditional Insurance Products
Global Agriculture Insurance Market est. USD 10 billion (2008)
Damage based ProductsDamage based Products
Fire Fire HailHail
Hail plus Named PerilsHail plus Named Perils
Named PerilsNamed Perils FrostFrost FloodFlood WindstormWindstorm Other perilsOther perils
Yield Guarantee based ProductsYield Guarantee based Products
Multi Peril Crop Insurance (MPCI)Multi Peril Crop Insurance (MPCI) Individual farm based policyIndividual farm based policy Area based policyArea based policy
Crop Revenue InsuranceCrop Revenue Insurance Yield and/orYield and/or Market PriceMarket Price
Multi Peril Crop InsuranceMulti Peril Crop Insurance Underwriting RequirementsUnderwriting 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 ProcessComplex Underwriting Process
Multi Peril Crop InsuranceMulti Peril Crop InsuranceCommon Underwriting ProblemsCommon Underwriting Problems
Individual farm yield guaranteeIndividual farm yield guarantee Yield data qualityYield data quality Farm management assessmentFarm management assessment Underwriting & Risk monitoring costUnderwriting & Risk monitoring cost
Asymmetric risk informationAsymmetric risk information Adverse selectionAdverse selection Moral hazardMoral hazard
High premium costHigh premium cost Low market penetrationLow market penetration Premium subsidy requiredPremium subsidy required
High Operating Requirements High Operating Requirements
Multi Peril Crop InsuranceMulti Peril Crop Insurance
Only viable with strongOnly viable with strong
Government supportGovernment support
Insurance Requirement - Insurance Requirement - FarmerFarmer
Insurance Requirement - Insurance Requirement - BankBank
Product Requirement - Product Requirement - InsurerInsurer
Limited aligned InterestLimited aligned Interest
Holistic Insurance Approach Holistic Insurance Approach
Agriculture DevelopmentAgriculture Development
Most Important Key DriversMost Important Key Drivers
Holistic Agricultural DevelopmentHolistic Agricultural Development
Full cooperation isFull cooperation isrequired from all required from all stakeholder forstakeholder forsuccessful & holistic successful & holistic agricultural development agricultural development
ConclusionsConclusions (1/2)(1/2)
Traditional Insurance Traditional Insurance in Agriculture Developmentin Agriculture Development
facilitates agriculture developmentfacilitates agriculture development act’s as catalystact’s as catalyst has shortcomingshas shortcomings is expensiveis expensive requires skilled insurance operationsrequires skilled insurance operations
Conclusions Conclusions (2/2)(2/2)Traditional Insurance in Traditional Insurance in Agriculture DevelopmentAgriculture Development
Access to resources & markets vitalAccess to resources & markets vital Education & know-how transfer centralEducation & know-how transfer central
Government support and holistic Government support and holistic agriculture development strategy is agriculture development strategy is needed for developing countriesneeded for developing countries
Thank youThank youfor your attentionfor your attention
Dr. Erich KastenDr. Erich Kasten
Agriculture Reinsurance Consultants GmbHAgriculture Reinsurance Consultants GmbHSwitzerlandSwitzerland
