July 28th, 2014

The Drivers of Agriculture Insurance in Asia, Part III: What Influences Agriculture Insurance?

Posted at 1:00 AM ET

peter_book_-smaller-hs3Peter Book, Head of Agriculture, Asia Pacific

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Having recognized what is driving agriculture and the importance of risk transfer, the next step is to look at what is influencing the insurance of agriculture and the impact of certain agents, ranging from governments to the (re)insurance industry.

Again a simple examination of the supply and demand equation for agriculture insurance can help to identify the main agents in the relationship, what is motivating them and how they can shape the equation, illustrated in the following table.

philipines-tables_2

“Agriculture Itself”

Guy Carpenter’s answer to the question: What are the drivers of agriculture insurance in Asia? It is agriculture itself.

More specifically though it is agriculture’s role in addressing the challenges that will develop as countries rise to meet the complex demands of:

  • • Increasing population and commensurate demand for food and other products
  • • Higher standards of living and changing diets
  • • Finite resources of land, water and chemicals
  • • The global marketplace and each country’s individual, and potentially competing, quest for food security and price stability.

For each country, local production of a considerable portion of its domestic food requirements is likely to be a relatively inflexible goal. As populations grow, this will require a general increase in productive efficiency that will require investment in agricultural production systems.

This investment will require an adequate rate of return and for this to occur affordable risk transfer needs to be introduced to the system.

This article first appeared in the June 2014 edition of Asia Insurance Review and is reprinted here with permission from Asia Insurance Review.

Link to Part I>>

Link to Part II>>

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