1. Page 1 World Bank, Istanbul 12-2005 Ulrich Ramseier - Swiss Re Ulrich E. Ramseier, Agronomist Natural Catastrophe Risk Management for Agriculture: Role of Reinsurance

2. Page 2 Content of presentation Swiss Re Agriculture and risks to agriculture in emerg. economies Risk management Possible solutions to nat cat risks for emerg. economies The role of reinsurance World Bank, Istanbul 12-2005 Ulrich Ramseier - Swiss Re

3. Page 3 Swiss Re World Bank, Istanbul 12-2005 Ulrich Ramseier - Swiss Re established 1863 in Zurich/Switzerland operates 70 offices in over 30 countries staff: about 8400 gross premium written (2004): close to 34 bio USD business areas covered: - life & health - property & casualty - financial solutions The Swiss Re Group is one of the leading and financially strongest reinsurers.

4. Page 4 Agriculture at Swiss Re 12 agronomists world-wide in different locations major markets: Europe, N-America traditional solutions covering “traditional” risks: - livestock (incl. aquaculture) - crops (incl. greenhouses) - forestry non-traditional solutions: - index based solutions in insurance and derivative form for weather and yield indexes World Bank, Istanbul 12-2005 Ulrich Ramseier - Swiss Re

5. Page 5 Agriculture in emerging economies World Bank, Istanbul 12-2005 Ulrich Ramseier - Swiss Re Characteristics farming community: - small scale, scattered agricultural holdings - often subsistence farming - limited financial resources and low technology - high vulnerability to natural catastrophes (nat cat) harvests needed to pay back credits large rural population being important for social stability

6. Page 6 Agricultural risks in emerging economies World Bank, Istanbul 12-2005 Ulrich Ramseier - Swiss Re “small scale” natural risks - hail, fire, mortality (animals) “large scale” natural catastrophes say “nat cats” - drought, flood - pests and diseases - hurricans/tornados/taifuns - (earthquake) price risks Three kind of risks are a serious concern:

7. Page 7 Strategies for risk mitigation World Bank, Istanbul 12-2005 Ulrich Ramseier - Swiss Re diversification adaptation (changing the crop or crop variety) physical protection:- windbreaks - hail nets - glasshouses financial protection:- self-insurance - mutuals buy insurance

8. Page 8 Limitation of traditional nat cat insurance in the agro sector World Bank, Istanbul 12-2005 Ulrich Ramseier - Swiss Re In emerging economies, we observe: solutions for “small scale” risks only high distribution and administration costs loss assessment procedures difficult Reasons for un-availability of nat cat covers: average frequency & severity of loss hardly known -> nat cats are low frequency/high severity events

9. Page 9 …. what is the solutions then? existing solutions - pool (Spanish, (Turkish) model) humanitarian relief - from governments - from international organisations innovative solutions - indexes - private-public partnerships World Bank, Istanbul 12-2005 Ulrich Ramseier - Swiss Re

10. Page 10 Existing solutions: The Spanish pool solution (simplified) World Bank, Istanbul 12-2005 Ulrich Ramseier - Swiss Re Agroseguro “pool” - 60 ins. companies sell under their name - policies from Agroseguro farmer Concorcio de Compensation de Seguros private reinsurance Subsidies - government - provinces

11. Page 11 Humanitarian relief World Bank, Istanbul 12-2005 Ulrich Ramseier - Swiss Re Yes… to cover basic needs of worst affected population but… “people may count on it” -> setting wrong signals only a valuable short term response not a long term solution risk of misappropriation slow availability of aid may further aggravate the depopulation of the rural areas

12. Page 12 Innovative solutions World Bank, Istanbul 12-2005 Ulrich Ramseier - Swiss Re Recent developments: index-solutions (weather parameters) + no loss history required, weather data sufficient + no loss assessment “on the ground” + low moral hazard World Food Program project in Ethiopia Particularities in emerging economies: quality of data basis (meteo) awareness of available products/solutions distribution to farmer “basis risks” remain

13. Page 13 Are public-private partnership in emerg. economies the solution? World Bank, Istanbul 12-2005 Ulrich Ramseier - Swiss Re high frequency/low severity events (minor losses): - should lie within the deductible of the insured medium frequency/medium severity events where some farmers may suffer severe losses -> pool solutions (Spain model Session V) -> mutuals low frequency/high severity events (nat cat) -> public - private- partnerships (Ethiopia) and RI solutions Conditions clearly distributed tasks (who does what) transparency of money flows

14. Page 14 Novel solutions: Ethiopia World Bank, Istanbul 12-2005 Ulrich Ramseier - Swiss Re World Food Program Ethiopian population risk takers “donors” contract rainfall trigger

15. Page 15 The role of reinsurance capacity providers primary risk takers (“risk is our business”) smoothening the effects of disastrous events for primary insurance sector or other risk takers (int. org., governments) (low frequency/high severity events) offering risk management services based on international expertise and experience World Bank, Istanbul 12-2005 Ulrich Ramseier - Swiss Re

16. Page 16 What is Swiss Re doing? selling traditional and non-traditional agricultural insurance world-wide preferred partner for traditional and non-traditional solutions offering assistance in developing insurance solutions keen to offer concepts and techniques for the development of weather risk solutions for emerging economies - knowledge and network to build indexes - growing portfolio World Bank, Istanbul 12-2005 Ulrich Ramseier - Swiss Re

17. Page 17 For further information, contact: World Bank, Istanbul 12-2005 Ulrich Ramseier - Swiss Re Ulrich E. Ramseier, Agronomist Underwriter Agricultural Risks Globals & Large Risks Swiss Reinsurance Company Mythenquai 50/60, CH-8022 Zurich Ulrich_Ramseier@swissre.com www.swissre.com