Andreas Bronk

1
Global agriculture insurance agriculture
reinsurance of Hannover re
Andreas Bronk
Agriculture Insurance Seminar Kyiv, July 8th,
2008
2
AGRIBUSINESS - A GLOBAL MEGATREND
Trends
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
GLOBAL TRENDS AFFECTING AGRICULTURE
Trends
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
DEMAND FOR MEAT SETS BIG PRESSURE ON GRAIN SUPPLY
Trends
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
WORLD PRICES OF FOOD COMMODITIES ARE HIGH
Trends
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
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GLOBAL TRENDS AFFECTING AGRICULTURE
Trends
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
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GLOBAL REINSURERS ARE CREATING SPECIALIZED TEAMS
Reinsurers
Hannover re is one of the few reinsurers with a
specialized team in agronomy and veterinary
science
GLOBAL REINSURERS ARE CREATING SPECIALIZED TEAMS
8
PREMIUM VOLUME IN 2007
Portfolio HR
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
PREMIUM DEVELOPMENT BY REGIONS
Portfolio HR
Geographical spread
PREMIUM DEVELOPMENT BY REGIONS
In USD
Latin America
Asia
USA
West Europe
Germany
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EARNED PREMIUM IN 2007
Portfolio HR
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
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DEVELOPMENT OF PREMIUM PER LINE OF BUSINESS
Portfolio HR
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 CONTROL
Aggregates
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
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PUBLIC - PRIVATE - PARTNERSHIP (1)
"PPP"
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 -gt
  France, Italy, Chile, Brazil
• HR's meetings with the Ministry of Agriculture -gt
  Colombia, El Salvador, Poland, Brazil
• Training for insurance companies
• World Bank -gt Central America, Peru, Caribbean
  Colombia

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PUBLIC - PRIVATE - PARTNERSHIP (2)
"PPP"
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

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OUTLOOK
"PPP"
Perspectives
OUTLOOK
Large potential to expand agricultural insurance
Insured
Under insured
Not insured
Not insurable
projection
now
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POTENTIAL IN EMERGING MARKETS
"PPP"
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

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INSURANCE PENETRATION IN AGRICULTURAL SECTOR
Perspectives
INSURANCE PENETRATION IN AGRICULTURAL SECTOR
Agriculture insurance premium as of agriculture
GDP
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POTENTIAL TO GROW
Perspectives
POTENTIAL TO GROW
Focus
Focus
Focus
Focus