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Andreas Bronk

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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Andreas Bronk

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

  2. 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.

  3. 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

  4. 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.

  5. 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

  6. 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

  7. 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

  8. 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

  9. Portfolio HR PREMIUM DEVELOPMENT BY REGIONS Geographical spread PREMIUM DEVELOPMENT BY REGIONS In USD Latin America Asia USA West Europe Germany

  10. 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

  11. 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.

  12. 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

  13. "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

  14. "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

  15. "PPP" OUTLOOK Perspectives OUTLOOK Large potential to expand agricultural insurance Insured Under insured Not insured Not insurable projection now

  16. "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

  17. Perspectives INSURANCE PENETRATION IN AGRICULTURAL SECTOR INSURANCE PENETRATION IN AGRICULTURAL SECTOR Agriculture insurance premium as % of agriculture GDP

  18. Perspectives POTENTIAL TO GROW POTENTIAL TO GROW Focus Focus Focus Focus

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