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

1. 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 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.

2. 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.

3. 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.

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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.

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 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

13. 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

14. 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

15. 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 = 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

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

17. Focus Focus Focus Focus POTENTIAL TO GROW POTENTIAL TO GROW
Perspectives
POTENTIAL TO GROW
POTENTIAL TO GROW
Focus
Focus
Focus
Focus