andreas bronk agriculture insurance seminar kyiv, july 8th, 2008 global agriculture insurance &...
TRANSCRIPT
Andreas Bronk
Agriculture Insurance Seminar Kyiv, July 8th, 2008
Global agriculture insurance & agriculture reinsurance of Hannover re
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Trends Reinsurers Portfolio HR Aggregates "PPP" Perspectives
(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)
(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
(3) The natural resources are limited • Land and water scarcity• Changing weather and increasing pollution
(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
Trends
AGRIBUSINESS - A GLOBAL MEGATRENDAs population and income rise, the race is on to meet changing nutritional needs
Our global food supply is faced with enormous challenges
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.
On the supply side, environmental pressures and increasing urbanization are putting further strain on already limited resources.
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Trends Reinsurers Portfolio HR Aggregates "PPP" Perspectives
GLOBAL TRENDS AFFECTING AGRICULTUREOur global food supply is faced with enormous challenges
Arable land
Food, Fuel, Feed, Forest, & Fiber Demand
Population growth
Time
Value
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
Demand for food is growing by 30% until 2020
Trends
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Trends Reinsurers Portfolio HR Aggregates "PPP" Perspectives
Fish 1,2
Poultry 2,5
Pork 3,6
Sheep and Cattle 8
Kilos of feed required to produce one kilo of body mass:
Cows in Sudan
DEMAND FOR MEAT SETS BIG PRESSURE ON GRAIN SUPPLY Large quantities of grain are required to produce meat
Feed Conversion Efficiency
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.
Trends
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Trends Reinsurers Portfolio HR Aggregates "PPP" Perspectives
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
WORLD PRICES OF FOOD COMMODITIES ARE HIGHwith consequences on demand for agriculture insurance
Trends
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Trends Reinsurers Portfolio HR Aggregates "PPP" Perspectives
Insurance demand
Value
Specialisation
Time
Intensification
Capital Investment
GLOBAL TRENDS AFFECTING AGRICULTURERisk transfer is necessary to protect the capital investment in the agric. sector
Higher efficiency required at every stage of the food supply chain - from farm to fork
Trends
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Trends Reinsurers Portfolio HR Aggregates "PPP" Perspectives
Group Premium (in m USD)Number of specialized
staff members
Münchener Rück (50% of the premium in USA)
600 28
Swiss Re 300 18 SCOR (incl. Converium) 120 7 Hannover Re (whole Group) 100 5 Partner re 100 7 Paris Re 40 3 Sum of major six reinsurers 1.260
93% of total reinsurance premium
Reinsurers
GLOBAL REINSURERS ARE CREATING SPECIALIZED TEAMS Hannover re is one of the few reinsurers with a specialized team in agronomy and veterinary science
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Trends Reinsurers Portfolio HR Aggregates "PPP" Perspectives
East Europe2 %
West Europe16 %
Australia + NZ5 %
Africa4 %
North America (incl.
Bloodstock)46 %
Asia12 %
Latin America15 %
West Europe14%
East Europe4%
Australia + NZ10%
Africa6%
Asia14%
Latin America29%
North America (inkl. Bloodstock)
23%
Worldwide HR Agro
World reinsurance premium volume = 1,63 bn USD World reinsurance premium in 2010 = 2 bn USD
PREMIUM VOLUME IN 2007per region
Worldwide Spread
Portfolio HR
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Trends Reinsurers Portfolio HR Aggregates "PPP" Perspectives
In USD
Latin America
Asia
West Europe
USA
Germany
PREMIUM DEVELOPMENT BY REGIONSGeographical spread
Portfolio HR
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Trends Reinsurers Portfolio HR Aggregates "PPP" Perspectives
Hail23%
Multi Peril Crop Insurance
48%
Livestock & Aquaculture
12%
Bloodstock9%
Forestry4%
Other4%
Hail28%
Livestock & Aquaculture
14%
Bloodstock9%
Forestry7%
Other2%
Multi Peril Crop Insurance
40%
Worldwide Estimated Premium HR Group100 Mio USD
Estimated world reinsurance premium volume 2007 = 1,35 bn USD
EARNED PREMIUM IN 2007per Line of Business
Worldwide Spread
Portfolio HR
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Trends Reinsurers Portfolio HR Aggregates "PPP" Perspectives
0
5
10
15
20
25
Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08
Multi Peril Crop Insurance Hail Livestock & Aquaculture Forestry
in m EUR
DEVELOPMENT OF PREMIUM PER LINE OF BUSINESSNew product as Multi Peril Crop Insurance growing
Figures correspond to the premium of TD31 – Agro only.
Portfolio HR
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Trends Reinsurers Portfolio HR Aggregates "PPP" PerspectivesAggregates
Territory PerilAggregates im PML (in
Mio. EURs)Number of contracts
Argentina Fire 1,650 4
Hail 29,570 22
Multiperil 7,299 32
Australia Fire 12,121 3
Multiperil 20,670 15
Mexico Animal Diseases 1,046 3
Drought 2,326 2
Multiperil 14,474 16
Chile Aquaculture 7,990 5
Fire 1,710 10
Multiperil 1,594 4
Brazil Fire 1,108 6
Multiperil 12,593 10
South Africa Animal Diseases 0,501 1
Fire 2,374 3
Multiperil 6,527 7
2008
Even if there is no accumulation with other branches, it is of big importance to keep control of aggregates
AGGREGATES CONTROLNew negative correlation with classical accumulation (EQ + Storm)
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Trends Reinsurers Portfolio HR Aggregates "PPP" Perspectives
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
"PPP"
PUBLIC - PRIVATE - PARTNERSHIP (1)International organizations & Governments are interested in AGRO insurance
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Trends Reinsurers Portfolio HR Aggregates "PPP" Perspectives
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
PUBLIC - PRIVATE - PARTNERSHIP (2)International organizations & Governments are interested in AGRO insurance
"PPP"
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Trends Reinsurers Portfolio HR Aggregates "PPP" Perspectives
OUTLOOKLarge potential to expand agricultural insurance
Perspectives
now
Insured
Under insured
Not insured
Not insurable
projection
"PPP"
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Trends Reinsurers Portfolio HR Aggregates "PPP" Perspectives
Emerging Markets
70 %
Developed countries
30 %
Developed countries;
80%
Emerging markets; 20%
Agricultural output2003 = 1,5 Trillion USD2007 = 2,5 Trillion USD
Agriculture insurance premium 2003 = 5,5 billion USD2007 = 8,0 billion USD
POTENTIAL IN EMERGING MARKETS
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
"PPP"
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Trends Reinsurers Portfolio HR Aggregates "PPP" Perspectives
0,000%
0,100%
0,200%
0,300%
0,400%
0,500%
0,600%
0,700%
0,800%
0,900%
as % of agriculture GDP
Industrial economies Emerging markets Latin America Eastern Europe Asia Middle East
INSURANCE PENETRATION IN AGRICULTURAL SECTORAgriculture insurance premium as % of agriculture GDP
Perspectives
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Trends Reinsurers Portfolio HR Aggregates "PPP" Perspectives
POTENTIAL TO GROW
Perspectives