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Traditional Insurance in Agriculture Development

Managing Risk in Financing Agriculture FAO - World Bank – AFRACA April 1-3, 2009 Johannesburg, RSA. Traditional Insurance in Agriculture Development. Dr. Erich Kasten ARC – Agriculture Reinsurance Consultants Switzerland. Traditional Insurance in Agriculture Development.

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Traditional Insurance in Agriculture Development

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  1. Managing Risk in Financing Agriculture FAO - World Bank – AFRACA April 1-3, 2009 Johannesburg, RSA Traditional Insurance inAgriculture Development Dr. Erich KastenARC – Agriculture Reinsurance Consultants Switzerland

  2. Traditional Insurance in Agriculture Development

  3. Agriculture Insurance Market Global Market estimated at USD 10 billion (2008)

  4. Agriculture Insurance MarketTraditional & Index Products Global Agriculture Insurance Market est. USD 10 billion (2008)

  5. Traditional Insurance Products Global Agriculture Insurance Market est. USD 10 billion (2008)

  6. Damage based Products • Fire • Hail • Hail plus Named Perils • Named Perils • Frost • Flood • Windstorm • Other perils

  7. Yield Guarantee based Products • Multi Peril Crop Insurance (MPCI) • Individual farm based policy • Area based policy • Crop Revenue Insurance • Yield and/or • Market Price

  8. Multi Peril Crop InsuranceUnderwriting 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 Process

  9. Multi Peril Crop InsuranceCommon Underwriting Problems • Individual farm yield guarantee • Yield data quality • Farm management assessment • Underwriting & Risk monitoring cost • Asymmetric risk information • Adverse selection • Moral hazard • High premium cost • Low market penetration • Premium subsidy required High Operating Requirements

  10. Multi Peril Crop Insurance Only viable with strong Government support

  11. Insurance Requirement - Farmer

  12. Insurance Requirement - Bank

  13. Product Requirement - Insurer

  14. Limited aligned Interest

  15. Holistic Insurance Approach

  16. Agriculture Development

  17. Most Important Key Drivers

  18. Holistic Agricultural Development State Full cooperation isrequired from all stakeholder for successful & holistic agricultural development

  19. Conclusions (1/2)Traditional Insurance in Agriculture Development • facilitates agriculture development • act’s as catalyst • has shortcomings • is expensive • requires skilled insurance operations

  20. Conclusions (2/2)Traditional Insurance in Agriculture Development • Access to resources & markets vital • Education & know-how transfer central • Government support and holistic agriculture development strategy is needed for developing countries

  21. Thank youfor your attention Dr. Erich Kasten Agriculture Reinsurance Consultants GmbH Switzerland dr.e.kasten@bluewin.ch

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