Transcript Public Sector Business Development

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ICAR-Conference 14. October 2008
Peter Hoppler
Director Public Sector
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Introduction
Slide 2

The following slides show some examples of solutions in
respect of protection for the agricultural sector in
Europe.

However each country needs a tailor made solution
being adjusted to the needs and the structure and the
history/traditions of the agricultural sector.

The future lies in a clear separation of tasks between
private and public bodies being regulated in the relevant
laws – but at the same time requires a tight cooperation.

Agricultural risk management is a topic that requires
responsibility from all stakeholders: the farmers, the
insurance sector and the state
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Agenda
Slide 3

Insurance Solutions in Europe

Case Romania

Weather and Agriculture

Swiss Re at a glance
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Insurance Solutions in Europe
source: Agro insurance Europe EU
Commission full report
Slide 4

FRANCE

Fonds National de Garantie des Calamités Agricol (FNGCA)
provides coverage for noninsurable risks.

Financed by farmers and by the public budget (50%). Contribution
collected by taxes levied on premiums paid.

FNGCA subsidizes a small part of insurance premiums on selected
insurance products.

If natural disaster is officially declared, idemnities are paid out to
the farmers that 1) bought insurance on at least one insurable risk
and 2) that suffered losses above a defined threshold.
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Insurance Solutions in Europe

SPAIN

Private-Public-Partnership involving:
– Agency of the Ministry of Agriculture, Fisheries and Food
(Entidad Estatal de Seguros Agrarios, ENESA)
– Pool of sixty private insurance companies (Agroseguro)
– Consortium for Insurance Compensation (Consorcio de
Compensación de Seguros, CCS

Goals:
– universal coverage
source: Swiss Re, sigma Report
1/2007
Slide 5
– insure all agricultural risks
– provide income stabilization
– Involvement of farmers in product design
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Insurance Solutions in Europe
How it works:
2)
Ministry of
Agriculture, Fisheries
and Food
ENESA
1)
Pool of Insurance
companies
(Agroseguro)
3)
4)
Regional
governments
Reinsurance
Consortium
CCS
Ministry of Economy
5)
Farmer Unions and
Cooperatives
source: In the style of, Swiss Re,
sigma Report 1/2007
Slide 6
International
Reinsurance
Market
Farmers
Insurance Solutions – Eastern
Europe
source: Agro insurance Europe EU
Commission full report.
Slide 7
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
CZECH REPUBLIC

SLOVENIA

In the Czech Republic
insurable risks are supposed to
be covered by the private
sector.

Ad-hoc measures provided by
the government for
extraordinary disasters
(draught, hail and frost).

Since 2004, the Support and
Guarantee Fund for Farmers
and Forestry (PGRLF) has
offered premium subsidies for
both crop and farm animal
insurance.

2006: National programme for
insurance premium subsidies
for crop producers. Initiation of
a systematic PPP in
agricultural risk management.
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Agenda
Slide 8

Insurance Solutions in Europe

Case Romania

Weather and Agriculture

Swiss Re at a glance
Case Romania - Current
situation
Slide 9
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
Law 381/2002 stipulates that farmers get indemnification
payments from the government for drought, frost, floods (provided
they have a hail insurance policy from a local insurer)

The government indemnifies in excess of 30% of the individual sum
insured

Fiscal policy and annual household budgets contain a considerable
uncertainty as no indemnification payments are budgeted.

In case of a declared calamity, government is in need of quick
payouts and thus is pushed to divert funds or raise debt.
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Farm A
Farm A
claims
Farm B
Farm B
to the
Farm C
government
Farm D
Farm C
Farm D
indemnification
by government
via local insurers
natural
catastrophe
event
government
declares emergency
Case Romania - Scheme in place
Euro mn
unexpected and non-budgeted expenses arise in the household budget
Slide 10
1
2
3
4
5
6
7
year
Case Romania - Prospects and
outlook
source: all Swiss Re estimates
Slide 11

7 major insurance companies offer hail policies.

Average premium of 3 – 4% is charged.

Current premium volume of € 18 – 20mn.

Market penetration approx. 20%.

Potential annual agriculture loss for the government
~ € 40 – 50mn.

Premium market potential ~ € 100mn.

Strong incentives from EU and increasing food prices.
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Case Romania - Potential
solution
Claim A
B
Reinsurance
compensation
financed by
annual premium
Reinsurance
C
threshold
Government
D
deductibles
Euro mn
E
Reinsurance
Government
deductibles
Slide 12
1
2
3
4
5
6
7
year
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Case Romania - Benefits
Slide 13
current situation
future approach
gross loss
to the
government
private /
public sharing

predictable cost (premium)

reduced and smoothened loss burden (loss sharing)

additional government funds available for disaster risk relief
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Case Romania - Pre-Conditions

declaration of a natural calamity and corresponding indemnification
follow scientific criteria, e.g.:
– water level at specific locations (flood)
– hydrological deficit (drought) measured via national weather
service considering temperature, humidity, rainfall
– temperature (winter frost)
– data is measured by national weather service
– threshold values/indices define if a natural calamity will be
declared or not

technical infrastructure needed
– weather stations & data
– georeferencing, satellite imaging & agri data
Slide 14
– agri extension & loss assessment services
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Agenda
Slide 15

Insurance Solutions in Europe

Case Romania

Weather and Agriculture

Swiss Re at a glance
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Weather and agro risks

Weather irregularities often cause substantial damage to life and
property, and the ecological basis of life

Damages from droughts and floods are rising.

Climate change will aggravate weather related damages
Solutions & Benefits
Slide 16

Coping with adverse financial consequences will be crucial

Ex-ante risk management as a substitute for, or complementary
element to, ex-post financing

Predictable funding can protect vulnerable people’s livelihoods with
timely and appropriate interventions
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Benefits of weather solutions
To farmers:

Insures debt services exposure against catastrophic events and
maintains creditworthiness

Smoothes income swings over time

Builds up savings and collateral over time
To banks/MFIs:

Secures lending and reduces default rates

Improves collateral

Can increase lending amounts and savings in rural areas
To governments:
Slide 17

Relief to financial budget in case of catastrophic events

Strengthening of political stability/favour of population
Swiss Re significantly supported
development of Indian weather
insurance market as a first mover

First deal in 2004 with Basix (microfinance institution)
for Castor and Groundnut crop in Mehbubnagar, Andhra
Pradesh against deficit rainfall covering 1 500 farmers

Since then 44 reinsurance contracts closed providing
coverage for 320,000 insured

Offers a viable alternative to the traditional crop
insurance market and has the potential to extend beyond
the agriculture sector up into the corporate end-user
market

Currently working on solutions for Agro Input companies,
Wind Farms, Tea Plantations, hydro power projects, Sugar
Production, Salt Production, various crops and
vegetables, contract farming etc
Slide 18
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Background information

The following crops have been covered:
Orange, Coriander, Salt, Stevia, Grapes,
Rice, Soybean, Fenugreek, Cumin,
Cotton, Coffee, Guar, Chilli, Brick Kiln,
Wheat

Most policies cover precipitation,
temperature or a combination thereof
Traditional agricultural
insurance products
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
Traditional products are indemnity based, i.e. a professional loss
adjustment, following agreed rules (manual) is made at the
insured’s location.

The following types of business are covered (main covers and
perils):
– Crops: yield reduction due to hail, drought, flood, storm, excessive
rainfall, frost. Quality and prices covers exist in certain markets.
– Forestry: loss of timber due to Fire and storm, extensions for snow
pressure in nordic countries.
– Livestock/Bloodstock: mortality/governmental ordered slaughter
(following preagreed rules) due to natural perils, accident, FLEXA,
diseases.
– Aquaculture: mortality and equipment losses due to weather perils
(storm), collision, diseases, jellyfish, predators, algae bloom.
– Greenhouses: loss of construction and crops due to hail, storm, fire.
Slide 19
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Agenda
Slide 20

Insurance Solutions in Europe

Case Romania

Weather and Agriculture

Swiss Re at a glance
Swiss Re is a global financial services
firm with a long history of success
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Swiss Re is …
… a financial services firm with 144 years of experience
… the world’s leading and most diversified reinsurer
… a proven expert in risk and capital management
… a pioneer and leader in capital market solutions
Quick Facts (31 Dec 2007)
Slide 21
Recent Awards

Revenues CHF 42.8 bn
•
Best Global Reinsurer (Reactions 2007)

Net income CHF 4.2 bn
•

Total investments: CHF 228 bn
Top-10 “Green Giant” (Fortune
Magazine, 2007)
•

Market cap CHF 29.8 bn
Top-50 “Low Carbon Pioneers” (CNBC,
2007)

11,000+ employees
•

90 offices in 25 countries
Insurance Borrower of the Year
(Euromoney, 2007)
•

Headquarters in Zurich, Switzerland
#1 Capital Raising of the Year
(Reactions, 2006)
The nature of our business
requires true global cooperation
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Our clients come from all over the world …
• Our clients include all leading insurers, many global Fortune
500 companies, who rely on us for comprehensive risk
solutions, as well as governments and recipients of
microinsurance in emerging markets
… and to serve them better we must be global, so we are!
Swiss Re Centre for Global Dialogue, Zurich
• To ensure the best solutions for our clients, every employee is
empowered to call upon any other unit from all around the
world to tap into its expertise and build a global team.
Asia
11%
Europe 1)
42%
Americas
47%
The “Gherkin”, London
Slide 22
Geographic split
Premiums (2007)
1) incl. Middle East and Africa
A presence on every continent