Sector Globally BY ROMAN HOHL
dex, with covers sold by bank agents and
managed by the state-owned Agriculture
Insurance Co. of India, as well as some
farmers are able to assume more risk
and therefore increase productivity in
the midterm—a key government goal in
many emerging markets.
been developed and implemented to unlock the country’s potential. In 2008, Russia launched the Program for Development
of Agriculture 2008-2012.
Reinsurers with dedicated and emerg-ing-market agricultural experts can play
an important role in structuring products,
closely working with the local insurance
industry and in providing significant reinsurance capacity.
The program aims at improving the
competitiveness of Russian agriculture, as
well as rural development and resource conservation. The result will be a major increase
in public spending, as well as a solid step to
improve social conditions in rural areas.
Non-borrowing farmers have the choice
to purchase the same crop insurance as
borrowing farmers. The government supports premiums through subsidies for more
than 60 crop types with some 20 million
farmers benefiting from the cover and generating a premium of $250 million in 2010.
These products brought some financial
relief after the devastating droughts of
2002 and 2009 and for a number of flood
events in between.
BRIC BY BRIC
Here’s a look at the agricultural-insurance
situation in the BRIC countries.
In Brazil, most insurance is sold jointly with
a farm loan from the state-owned Bank of
Brazil, the key supplier of rural finance.
Agricultural insurance in Russia was
introduced in the late 1990s. In 2007, total
premium volume in agricultural insurance
was about $400 million. Although Russia subsidizes multi-peril crop insurance,
insurance penetration remains low. To provide investors and farmers with the risk-management framework they need, further
innovative insurance products are needed.
China’s agricultural system is similar to
that of India in that it is composed of
small-scale farming and has up to 30
percent of the population working in the
The catalyst for government-backed
agricultural insurance in Brazil was a devastating drought in the south of the country in 2003-2004, when soybean yields
dropped by 30 percent compared to previous year levels.
With record spending in ad-hoc disaster aid, the government realized that
only a few farmers were insured and decided to support crop insurance through
Most crop insurance in India is also sold
via banking channels. The subcontinent
has small farms that grow a large variety of
crops in two seasons and strongly depend
on the timely onset of monsoon rains.
In 2007, the Chinese government
launched the “three rural issues” plan,
which included establishing government-supported agricultural insurance. In 2010,
seven licensed insurers provided peril-crop
and livestock insurance to 120 million
farmers generating an estimated premium
volume of $2.5 billion.
For farmers who borrow from government banks, crop insurance is compulsory in the form of yield or weather in-
To overcome the high costs of selling
insurance to a large number of individual
farmers, policies are sold at village level in
collaboration with village heads. NU
The reinsurance industry was instrumental in structuring a farm-based multi-peril crop-insurance cover and in transferring know-how to Aliança do Brasil, the
insurance subsidiary of Bank of Brazil. The
market premium is expected to be close to
$200 million in 2010.
Agricultural Insurance In
Developed Markets: Stagnant
Russia has a large, but yet untapped agricul-ture-production potential. During the past
years, an agricultural-policy framework has
CROP INSURANCE has been avail- able for many decades in key pro- ducing markets in North America,
Europe, Australia and South Africa. Peril
and multi-peril crop insurance are the
main products available to predominantly large-scale farmers using modern
farming technology. (Digital subscribers
click here for a glossary of agricultural-insurance terms.)
provide additional forms of protection
for large losses. Underwriting is based
on a series of insurance-loss data,
containing impacts of systemic risks
such as drought or flood.
E Roman Hohl is
head of agriculture
The insured unit is usually the farm,
with losses being adjusted by qualified
personnel. Governments subsidize
insurance premiums and, in some cases,
The developed markets generate
a majority (80 percent) of the global
agricultural-insurance premium, estimated
at $16.7 billion in 2009 (see map). However,
government support in premium subsidies
is stagnating, or has been decreasing, as
a high insurance penetration has been
achieved and government priorities have
shifted to other sectors of the economy. NU