Developments in the Indian Weather Market

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Developments in the Indian Weather Market
Marcel Stäheli WRMA Annual Meeting Miami, 9 - 11
May 2007
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Who are we?
Specialities
ECM(Environmental and Commodity Markets) 13
Members (NY, Zurich Mumbai)
Agricultural Insurance 16 Members (worldwide)

• Crops
• Glasshouses
• Forestry, plantations

• Weather and energy
• Emissions
• ELPRO (contingent power price option)

• Livestock
• Bloodstock
• Aquaculture

Focus on parametric insurance
Focus on indemnity based insurance
Able to combine traditional reinsurance with
modern methods of capital markets.
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Indian Agricultural Production highly dependent
upon Monsoon Rainfall

• Historical Kharif Rainfall and Crop Production

• Irrigation
• only 40 of cultivated area accessed
  byirrigation system
• only 20 effectively irrigated
• 80 depend uponrainfall
• Agro Sector
• India sustains 16 of the worlds population on
  2.4 of land resource
• Agriculture contributes 24 of the Indian GDP
• Livelihood support to two-thirds of the
  population

Year 2003 49 dip in July rainfall Kharif
output fell by 19, and Agri GDP by 3.1 leading
to drop in overall GDP growth
Source Innovative Financial Services for Rural
India Ulrich Hess, July 2003
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Insured Crops
Covered Crops
Weather Perils
Deficit / excess rainfall High relative humidity
(RH) Excessively high and low temperatures Prolong
ed dry spell Combination of above
Field Crops Soybean, paddy, cumin, coriander,
fenugreek, wheat etc. Horticulture Crops
Oranges, grapes, apples, peach etc.
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Indian Weather Market
UNTIL TODAY over 539,000 Indian farmers have
taken weather insurance
MARKET PLAYERS - 8 PC direct insurers -
Currently active 1) Agricultural Insurance
Corporation of India Ltd. 2) ICICI Lombard
General Insurance Company Ltd. 3) IFFCO Tokyo
General Insurance Co. Ltd.- Banks expected to
join after regulator signed-off on weather
derivatives
END USERS - Farmers - Wind farms - Corporates
engaged in contract farming - Hydro power
projects- Tea/coffee plantations - Salt
production- Sugar producers - Bio-diesel
plantations
DISTRIBUTIONS - Banks - Micro finance
institutions CHANNELS - Insurance agents -
Kiosk- Brokers - NGOs- Co-operatives - Self
help groups
Swiss Re Estimate
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Crop Calendar and Rainfall Pattern
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Deviation in Rainfall and Impact on Yield
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Loss Payment through Weather Insurance
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Example of Closed Weather Programme Term Sheet
(1/2)
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Example of Closed Weather Programme Term Sheet
(2/2)
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Swiss Re Initiatives in the Indian Weather Market

• 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 36 fac R/I contracts closed reinsured
  272,590 policies
• Estimated market growth 2006 to 2007 by 200
• 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
  providers, wind farms, tea plantations, hydro
  power projects, sugar salt production, various
  crops and vegetables, contract farming etc

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Contact Information
Swiss Reinsurance Company Mythenquai
50/60 CH-8022 Zurich
Marcel Stäheli Director Head Weather and Energy
Underwriting Phone [phone] E-mail
M_Staeheli_at_swissre.com