Presentation on theme: "AGRIBUSINESS - A GLOBAL MEGATREND"— Presentation transcript:
0 Global agriculture insurance & agriculture reinsurance of Hannover re Andreas BronkAgriculture Insurance SeminarKyiv, July 8th, 2008
1 AGRIBUSINESS - A GLOBAL MEGATREND TrendsOur global food supply is faced with enormous challengesAGRIBUSINESS - A GLOBAL MEGATRENDAGRIBUSINESS - A GLOBAL MEGATRENDAs 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 agricultureForeign capital is moving into agricultural sector in emerging marketsRich countries are interested in supplying high-quality food for world marketsCountries worldwide are interested in gaining food self-sufficiency(1) Global population is growing by people every dayStrongest population growth in AsiaPeople increasingly live in urban centresLife expectancy is increasingIn 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 limitedLand and water scarcityChanging 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.On the supply side, environmental pressures and increasing urbanization are putting further strain on already limited resources.
2 GLOBAL TRENDS AFFECTING AGRICULTURE Our global food supply is faced with enormous challengesValueArable landFood, Fuel, Feed, Forest, & Fiber DemandPopulation growthTimeDemand for food is growing by 30% until 2020Every 7 years arable land of the size of Germany disappears due to desertification and urbanizationIn 2015 the population will be about 7,1 bnAnnual revenue (estimated 2007)Agribusiness: 5,25 Trillion USDAgriculture: 1,8 Trillion USD* Arable land remains until now almost stable (1,5 bn hectares), but on the long run it will decline. China lost in the last decade 10 m hectars arable land. This area represents almost the agriculture area in Germany's which is about 12 m hectars.** Population growth: There will be more than 1 billion more people in the world in 2015 than there were in 2000 (as population grows from about 6 to 7.1 bn).Example:Corn is probably the commodity most directly impacted by bio fuels. An estimated 25 to 30% of the USA corn crop goes to ethanol.Earth Policy Institute noted that demand for grain by ethanol distillers jumped from 54 in 2006 to 81 million tons in 2007.
3 DEMAND FOR MEAT SETS BIG PRESSURE ON GRAIN SUPPLY TrendsFeed Conversion EfficiencyDEMAND FOR MEAT SETS BIG PRESSURE ON GRAIN SUPPLYDEMAND FOR MEAT SETS BIG PRESSURE ON GRAIN SUPPLYLarge quantities of grain are required to produce meatCows in SudanAn 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.
4 WORLD PRICES OF FOOD COMMODITIES ARE HIGH TrendsWORLD PRICES OF FOOD COMMODITIES ARE HIGHWORLD PRICES OF FOOD COMMODITIES ARE HIGHwith consequences on demand for agriculture insuranceThe 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
5 GLOBAL TRENDS AFFECTING AGRICULTURE Higher efficiency required at every stage of the food supply chain - from farm to forkGLOBAL TRENDS AFFECTING AGRICULTUREGLOBAL TRENDS AFFECTING AGRICULTURERisk transfer is necessary to protect the capital investment in the agric. sectorInsurance demandValueSpecialisationTimeIntensificationCapital Investment
6 GLOBAL REINSURERS ARE CREATING SPECIALIZED TEAMS Hannover re is one of the few reinsurers with a specialized team in agronomy and veterinary scienceGLOBAL REINSURERS ARE CREATING SPECIALIZED TEAMSGLOBAL REINSURERS ARE CREATING SPECIALIZED TEAMS
7 PREMIUM VOLUME IN 2007 PREMIUM VOLUME IN 2007 per region HR Agro Portfolio HRWorldwide SpreadPREMIUM VOLUME IN 2007PREMIUM VOLUME IN 2007per regionWorldwideHR AgroWorld reinsurance premium volume = 1,63 bn USD World reinsurance premium in 2010 = 2 bn USD
8 PREMIUM DEVELOPMENT BY REGIONS Portfolio HRGeographical spreadPREMIUM DEVELOPMENT BY REGIONSPREMIUM DEVELOPMENT BY REGIONSIn USDLatin AmericaAsiaUSAWest EuropeGermany
9 Estimated Premium HR Group 100 Mio USD Portfolio HRWorldwide SpreadEARNED PREMIUM IN 2007EARNED PREMIUM IN 2007per Line of BusinessWorldwideEstimated Premium HR Group 100 Mio USDEstimated world reinsurance premium volume 2007 = 1,35 bn USD
10 DEVELOPMENT OF PREMIUM PER LINE OF BUSINESS Portfolio HRDEVELOPMENT OF PREMIUM PER LINE OF BUSINESSDEVELOPMENT OF PREMIUM PER LINE OF BUSINESSNew product as Multi Peril Crop Insurance growingin m EURFigures correspond to the premium of TD31 – Agro only.
11 AGGREGATES CONTROL 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
12 PUBLIC - PRIVATE - PARTNERSHIP (1) "PPP"PUBLIC - PRIVATE - PARTNERSHIP (1)PUBLIC - PRIVATE - PARTNERSHIP (1)International organizations & Governments are interested in AGRO insuranceThere is a clear development from Governments & International Organizations to provide risk-management instruments in agriculture through the private sectorWhy?Maintain alimentary security and thereby reduce the risk of social commotions, civil wars & riotsMaintain an international competitive agricultureProvide modern (WTO-Compliant) risk management instrumentsEffective deployment of fundsEffective and individual coverage of agricultural production against weather-related yield lossesHigh insurance penetration, available to all farmersWhere?Multi Perils Crop Insurance Development -> France, Italy, Chile, BrazilHR's meetings with the Ministry of Agriculture -> Colombia, El Salvador, Poland, BrazilTraining for insurance companiesWorld Bank -> Central America, Peru, Caribbean & Colombia
13 PUBLIC - PRIVATE - PARTNERSHIP (2) "PPP"PUBLIC - PRIVATE - PARTNERSHIP (2)PUBLIC - PRIVATE - PARTNERSHIP (2)International organizations & Governments are interested in AGRO insuranceInsurance companies' roleAssume liabilityProduct development and innovationActive underwriting, monitoring, loss assessment and claims handlingCooperation with government, associations and organizationsHannover re's roleKnowledge transfer from other marketsActive support in development and establishmentTailor made reinsurance concepts / capacitiesEfficient handling of agricultural insurance cover thanks to special agricultural insurance know-how
14 Under insured Not insured Not insurable projection now "PPP"OUTLOOKPerspectivesOUTLOOKLarge potential to expand agricultural insuranceInsuredUnder insuredNot insuredNot insurableprojectionnow
15 POTENTIAL IN EMERGING MARKETS "PPP"POTENTIAL IN EMERGING MARKETSPOTENTIAL IN EMERGING MARKETSAgricultural output 2003 = 1,5 Trillion USD 2007 = 2,5 Trillion USDAgriculture insurance premium = 5,5 billion USD 2007 = 8,0 billion USDIf 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
16 INSURANCE PENETRATION IN AGRICULTURAL SECTOR PerspectivesINSURANCE PENETRATION IN AGRICULTURAL SECTORINSURANCE PENETRATION IN AGRICULTURAL SECTORAgriculture insurance premium as % of agriculture GDP
17 Focus Focus Focus Focus POTENTIAL TO GROW POTENTIAL TO GROW PerspectivesPOTENTIAL TO GROWPOTENTIAL TO GROWFocusFocusFocusFocus