Global agriculture insurance & agriculture reinsurance of Hannover re Andreas Bronk Agriculture Insurance Seminar Kyiv, July 8th, 2008

AGRIBUSINESS - A GLOBAL MEGATREND Trends Our global food supply is faced with enormous challenges AGRIBUSINESS - A GLOBAL MEGATREND 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. On the supply side, environmental pressures and increasing urbanization are putting further strain on already limited resources.

GLOBAL TRENDS AFFECTING AGRICULTURE Our global food supply is faced with enormous challenges Value Arable land Food, Fuel, Feed, Forest, & Fiber Demand Population growth Time 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 Annual revenue (estimated 2007) Agribusiness: 5,25 Trillion USD Agriculture: 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.

DEMAND FOR MEAT SETS BIG PRESSURE ON GRAIN SUPPLY Trends Feed Conversion Efficiency DEMAND FOR MEAT SETS BIG PRESSURE ON GRAIN SUPPLY 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.

WORLD PRICES OF FOOD COMMODITIES ARE HIGH Trends WORLD PRICES OF FOOD COMMODITIES ARE HIGH 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

GLOBAL TRENDS AFFECTING AGRICULTURE Higher efficiency required at every stage of the food supply chain - from farm to fork GLOBAL TRENDS AFFECTING AGRICULTURE GLOBAL TRENDS AFFECTING AGRICULTURE Risk transfer is necessary to protect the capital investment in the agric. sector Insurance demand Value Specialisation Time Intensification Capital Investment

GLOBAL REINSURERS ARE CREATING SPECIALIZED TEAMS Hannover re is one of the few reinsurers with a specialized team in agronomy and veterinary science GLOBAL REINSURERS ARE CREATING SPECIALIZED TEAMS GLOBAL REINSURERS ARE CREATING SPECIALIZED TEAMS

PREMIUM VOLUME IN 2007 PREMIUM VOLUME IN 2007 per region HR Agro Portfolio HR Worldwide Spread PREMIUM VOLUME IN 2007 PREMIUM VOLUME IN 2007 per region Worldwide HR Agro World reinsurance premium volume = 1,63 bn USD World reinsurance premium in 2010 = 2 bn USD

PREMIUM DEVELOPMENT BY REGIONS Portfolio HR Geographical spread PREMIUM DEVELOPMENT BY REGIONS PREMIUM DEVELOPMENT BY REGIONS In USD Latin America Asia USA West Europe Germany

Estimated Premium HR Group 100 Mio USD Portfolio HR Worldwide Spread EARNED PREMIUM IN 2007 EARNED PREMIUM IN 2007 per Line of Business Worldwide Estimated Premium HR Group 100 Mio USD Estimated world reinsurance premium volume 2007 = 1,35 bn USD

DEVELOPMENT OF PREMIUM PER LINE OF BUSINESS Portfolio HR DEVELOPMENT OF PREMIUM PER LINE OF BUSINESS 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.

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

PUBLIC - PRIVATE - PARTNERSHIP (1) "PPP" PUBLIC - PRIVATE - PARTNERSHIP (1) 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 -> France, Italy, Chile, Brazil HR's meetings with the Ministry of Agriculture -> Colombia, El Salvador, Poland, Brazil Training for insurance companies World Bank -> Central America, Peru, Caribbean & Colombia

PUBLIC - PRIVATE - PARTNERSHIP (2) "PPP" PUBLIC - PRIVATE - PARTNERSHIP (2) 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

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

POTENTIAL IN EMERGING MARKETS "PPP" POTENTIAL IN EMERGING MARKETS POTENTIAL IN EMERGING MARKETS Agricultural output 2003 = 1,5 Trillion USD 2007 = 2,5 Trillion USD Agriculture insurance premium 2003 = 5,5 billion USD 2007 = 8,0 billion 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

INSURANCE PENETRATION IN AGRICULTURAL SECTOR Perspectives INSURANCE PENETRATION IN AGRICULTURAL SECTOR INSURANCE PENETRATION IN AGRICULTURAL SECTOR Agriculture insurance premium as % of agriculture GDP

Focus Focus Focus Focus POTENTIAL TO GROW POTENTIAL TO GROW Perspectives POTENTIAL TO GROW POTENTIAL TO GROW Focus Focus Focus Focus