Gain a holistic view of agricultural (re)insurance and capital market risk transfer Increasing agricultural production and food security remain key challenges for mankind. In order to meet global food demand, the Food and Agriculture Organisation estimates that production has to increase by 50% by 2050 and requires large investments. Agricultural insurance and financial instruments have been an integral part to advancing productivity and are becoming more important in increasingly globalized and specialized agricultural supply chains in the wake of potentially more frequent and severe natural disasters in today’s key producing markets. Underwriting, pricing and transferring agricultural risks is complex and requires a solid understanding of the production system, exposure, perils and the most suitable products, which vastly differ among developed and developing markets. In the last decade, new insurance schemes in emerging agricultural markets have greatly contributed to the large growth of the industry from a premium volume of US$10.1 billion (2006) to US$30.7 billion (2017). This growth is bound to continue as insurance penetration and exposure increase and new schemes are being developed. Agricultural (re)insurance has become a cornerstone of sovereign disaster risk financing frameworks. Agricultural Risk Transfer introduces the main concepts of agricultural (re)insurance and capital market risk transfer that are discussed through industry case studies. It also discusses best industry practices for all main insurance products for crop, livestock, aquaculture and forestry risks including risk assessment, underwriting, pricing, modelling and loss adjustment. Describes agricultural production risks and risk management approaches Covers risk transfer of production and financial risks through insurance and financial instruments Introduces modelling concepts for the main perils and key data sources that support risk transfer through indemnity- and index-based products Describes risk pricing and underwriting approaches for crop, livestock, aquaculture and forestry exposure in developed and developing agricultural systems Become familiar with risk transfer concepts to reinsurance and capital markets Get to know the current market landscape and main risk transfer products for individual producers, agribusinesses and governments through theory and comprehensive industry case studies Through Agricultural Risk Transfer, you’ll gain a holistic view of agricultural (re)insurance and capital market solutions which will support better underwriting, more structured product development and improved risk transfer.
Research related to climate variability is particularly important in the current conditions faced by Argentine agriculture. These include (a) increased specialization in soybeans, with resulting reduced possibilities of risk-reduction though "portfolio" effects, (b) increased importance of agriculture in "non-traditional" areas, generally characterized by lower yields, higher yield variability and higher production and transport costs, (c) macroeconomic instability resulting in severe contraction and increased interest rates of credit and (d) upward trend in input use and per-acre production costs with consequent increase in break-even crop yields. This paper summarize recent research related to production variability in Argentine agriculture, as well as the consequences of this variability on efficiency and resource allocation and present an overview of strategies for coping with climate variability. We estimate possible benefits to agricultural producers of improved risk-transfer mechanisms. In particular, we obtain estimates of Willingness-to-Pay (WTP) of selected index-type insurance mechanisms for soybean and milk production and outline the requirements for the development of a risk-transfer market for agricultural producers.
Climate change, technological innovation, and financialization are three of the most transformative processes shaping spatial planning and policymaking. Yet, each of these macro-structural processes and their consequences are experienced in the short-term and at geographically-specific scales. In the context of planning, financialization needs to be better understood to evaluate its actual processes and consequences through in-depth analyses of specific cases. Since 2007, India's weather insurance programs have become the largest in the world offering farmers access to new financial instruments and automated technologies to manage the increasing risks of agricultural cultivation. Insurance has come to be seen as a systematic response to the increasing impacts of drought and flooding since the green revolution and an agrarian crisis that has witnessed over 300,000 farmers commit suicide between 1995-2015. In this dissertation, I ask how and why insurance, which never played a significant role several decades ago, has come to be a central planning strategy for agricultural policymakers, outpacing all other government expenditure in the form of premium subsidies. I study the development of weather insurance programs in India and examine implementation across four major agricultural states-Maharashtra, Andhra Pradesh, West Bengal, and Punjab-to show how risk transfer in the agricultural sector has been increasingly financialized, with a growing dependence on new derivative instruments and the rising penetration of international reinsurance capital. The overarching research questions motivating my dissertation include: how does the introduction of new insurance policies, financial instruments, and weather technologies impact the agrarian landscape? how do these insurance programs define and measure risk? what are the spatial dimensions of insurance, its variation and its coverage? what is the importance of these developments in terms of how agricultural risk gets financialized for long-term planning as well as political contestation? and what it means to plan for weather risk and climate change in a context of the rapid churning of technologies and the financialization of risk? In my research methodology, I employ granular analysis of actors, agents, and actions, while paying attention to structural positions, systemic rationalities, and recurrent patterns. I conducted interviews with over 40 insurance professionals, underwriters and government experts as well as with 60 farmers and local officials in four states - West Bengal, Maharashtra, Punjab and Andhra Pradesh. I used archival and document analyses as well as spatial analysis of insurance business data to understand and explain spatial variation in policy implementation and outcomes. Amidst the numerous scholarly debates about the role of finance and meaning of financialization, the spatial dimensions of risk and financialization are not well understood. Through my research, I explain financialization of weather risk through an analysis of underwriting methodologies for actuarial models, financial instruments, and automated weather technologies. I show how complexities and shifts in seasonal geographies and temporalities further complicate the extent to which harm, loss, risk can be correlated with financial precision and pricing. I argue that the speed of convergence towards automated and index-based systems has been followed by the disempowerment of farmers who have trouble disputing the terms and eligibility of coverage especially in the case of index insurance contracts, where disputes related to measurement errors and manipulation have had a significant negative effect on adoption, with many states and insurers reducing their offering of such policies. I further argue that the rise of the financialization of risk in the agricultural sector in particular is concurrent with the ascent of a global fast policy environment since the 1970s that facilitates iterative and experimental development of actuarial systems along transnational policy circuits. I contribute archival and empirical findings to show that Indian agricultural policy has witnessed a shift in focus away from the distribution of land, infrastructure, and productivity that were important in post-independence India and the Green Revolution, towards new forms of "riskholding" in the post-Green Revolution period, in which the government focuses on the ways in which the financial risks of agricultural producers are managed and transferred. In my comparative examination of the four states, I show that while insurance mitigates some forms of inequality through subsidies, structural inequalities as a function of inherited landholding disparities and landlessness are reinforced. My overall contention is that agricultural planning and policymaking, specifically through insurance, shifts resources away from longer-term considerations of addressing inequalities of assets such as land and capital, towards the problems of "riskholding," which constitutes a new dimension of differentiation that, in effect, magnifies the salience of short-term financial risk and risk hedging strategies instead of agricultural investment and infrastructure development. Finally, I find that financial risk in its various forms is becoming politicized in ways that are not accounted for in the current literature. I use my case studies to contribute to the literature on the financialization of agriculture (via an intervention in the ongoing debate on the "agrarian question") with a focus on the ways in which insurance subsidies, electoral politics and debt-based mobilization are a manifestation of a more broad-based politics of financialization. The politicization of financial risk ultimately upends the actuarial approach through state-specific variations in implementation through insurance subsidies and loan waivers as electoral strategies. These newly emergent systems are hierarchical and unevenly empower risk capital and new forms of actuarial automation, while risk capital markets and technologies are reshaping the context of planning and the ways weather indicators and indexes are defined and calculated. Furthermore, the uncertainty and severity of climate variability through unseasonal rainfall, drought, flooding, and disease present complex challenges for the very viability of agricultural production that are not adequately addressed through the insurance program, but may in fact, temporarily mask these processes through continued and pervasive ecological extraction and indebtedness. Ultimately, insurance is an incomplete mathematical (actuarial) technology for planning because it assumes fixed aggregate risks and non-correlation of risks. More than the mathematical possibilities and constraints of insurance, new models may show the potential for anti-neoliberal forms of decentralization in insurance and financialization through blockchain and other distributed technology for mutual, peer-to-peer risk management.
Seminar paper from the year 2014 in the subject Agrarian Studies, grade: 1,0, Hamburg School of Business Administration gGmbH (Department of Finance & Accounting of HSBA Hamburg School of Business Administration), course: Specialisation Finance, language: English, abstract: The assignment deals with the question whether derivatives harm society as a whole. The central issue is a possible impact of derivatives prices on present prices for agricultural commodities. In order to provide the necessary background knowledge, the terms derivatives, varieties, valuation, market participants and principles of operation are explained. After recognising theoretical knowledge and the results of different studies, it turns out that there is no empirical evidence for plausible harming impacts of over speculating index investors. Further studies have to be conducted in future in order to provide a reliable proof for policy makers.
These OECD workshop proceedings examine the various risk strategies used by farm households, in particular those attracting renewed interest such as diversification of income sources, vertical co-ordination, hedging on futures markets, insurance coverage and public safety-nets.
ÿThe international conference on ?Weather index insurance in Africa: lessons learnt and goals for the future? was organised by the Department of Economics, University of the Western Cape, in collaboration with its international partners. The conference attracted over 40 participants drawn from academic and research institutions, insurance practitioners, reinsurers, government policy makers, bankers, agricultural producers, and representatives of non-governmental organisations. The presenters highlighted experiences, challenges and opportunities based on current pilot projects on weather index insurance in many parts of Africa.