About 87% of the world’s small farms (<2 ha) are in Asia. With increasing population, and limited land resources, the average landholding is further decreasing.
In emerging markets, due to large number of landholdings, it becomes difficult to
Landholding/value of the crop decreases, inefficiencies in implementing an indemnity based product increases.
Index based solutions (like weather index, yield index) take care of the challenges. But need to note the issue of “basis risk”, difference in actual losses and the losses projected by the product.
Ideally: Insurers should have granular and objective risk view without having to incur high cost! Technology Helps
Agriculture Insurance: A priority in Asia
Agricultural Risks not only affect famers , they also affect the whole value chain
(i.e Input supplier, Distributor,Farmer,Trader, Processor,consumer).
From a corporate social responsibility perspective, Grandiose hopes to improves the quality of life for local communities in emerging economies by making appropriate insurance solutions available such as weather index-based insurance to farms – this allows them to attract the necessary funding and investments.
Agriculture Sector in Myanmar constitute 40% of the GDP and feed approximately2/3 of population on estimated 16million acres of land
Food Security a crucial issue- Government “need to feed” their population
For Cat Losses affecting more than 250,000 people: 10 year asia agriculture production losses in emerging economies estimate : ‘USD48bn (2003-2013*)
Governments’ support for agri insurance market development- risk transfer tool preferred by government, as opposed to funding losses with cash handouts.
Agriculture insurance demand set to increase.
China: USD 0.11Bn (2006)-> USD 6.3Bn premium (2016)
India: USD 0.5Bn(2015)-> USD 3.3bn in premium (2016)
Rice scheme in Thailand, Indonesia,etc
Indemnity Based with name peril
3 LOB insured (Crop, Forestry, Livestock)
Payout: Loss Ratio, defined by claim loss assessment
Index based (both yield and weather), multi peril by crop
Payout: Deviation from a predefined threshold
Experience Rating
Pricing Based on claims experience
Past represents future
Proper inflation method of losses is key
Exposure Rating
Pricing based on current exposure, or sum insured (e.g CAT Models)
Exposure is the input
Policy Conditions also taken into account
The more detailed the data, the more precise the pricing