Agriculture Reinsurance Market

Market Overview

The agriculture reinsurance market is expected to grow at a CAGR of 11.2% during the forecast period, 2022–2030.

Agriculture reinsurance refers to the production and financial risks of farmers and associated shortfall risks of interrelated stakeholders such as input suppliers and grain processors. Agriculture reinsurance is, in simple terms, insurance taken by insurers. When a risk or group of risks presage a hazard beyond the pale, it is high time for an insurance company to claim reinsurance, i.e. insurance of the insurance. This purchase is also known as ‘ceding.’

In reinsurance, the risk and premium are transferred to other insurers, which distributes the risk and substitutes for equity debt. Reinsurance plays a major role in agriculture insurance as a consequence of the government’s engagement via subsidized reinsurance and through broad participation of the private reinsurance industry.

Reinsurance has many advantages such as deducing the results of the insurance company over a period and limiting the exposure of individual risks and restricting losses paid out by the insurance company. Agriculture insurance contains complexities that arise from the characteristics of the risks covered and asymmetries of information, and potential moral hazards have encouraged the development of specialized underwriters and loss adjusters, who have the skills and expertise to practice in the agriculture insurance market. The design of suitable agricultural reinsurance programs is subject to similar complexities and requires skill and expertise.

Market Dynamics

Uncertainty of nature, governments’ support for agricultural activities, and technology revolution are some of the growth factors for the global agriculture reinsurance market. Old problems can be encountered with modern solutions with the technology revolution. The use of satellite images enables efficient loss assessments in agro (re)insurance and a detailed image of the damages by satellite can assess its exposure in real-time, which helps to know the potential risk in advance. Also, technology contributes in mitigating the asymmetry of information between the (re)insurers and the insured. Therefore, technological advancements bolster the demand for agriculture reinsurance.

The increasing need for an alternative to shareholder’s capital to meet the massive demand drives market growth. Reinsurers minimize damage, provide capital for the real economy, and prevent risks. Additionally, strong government support in various countries across the globe is also boosting market growth. For instance, the Indian Government is committed to funding reinsurance schemes due to lucrative social and economic benefits of the robust crop insurance market.

On the flip side, poor clarity of exposures and lack of awareness are expected to impede the growth of the agriculture reinsurance market around the globe.

Segmental Analysis

The global agriculture reinsurance market can be segmented on the basis of product into managed crop hail insurance, multi-peril crop insurance, livestock insurance, greenhouse insurance, aquaculture insurance, bloodstock insurance, and forestry insurance. Agriculture reinsurance is widely available for managed crop hail insurance and multi-peril crop insurance.

Regional Analysis

Geographically, the global reinsurance market is studied across North America, Europe, Asia-Pacific, and LAMEA.

The U.S. government provides significant reinsurance support. Successful and advanced space and weather monitoring technologies boost the growth of the agriculture reinsurance market in North America. Many different public policy tools are used in different parts of the U.S., ranging from specific legislations to ministerial decisions and public funds designed to promote the use of some coverage or provide ex post responses, especially in the course of damaging weather events.

In Europe, the public sector plays an important role in agricultural reinsurance, either in the form of public sector reinsurers (Spain and Turkey) or through the arrangement with the government to settle surplus claims (Italy and Poland).

Asia-Pacific is a prominent region for the agriculture reinsurance market because of natural diversification owing to a large number of agro-climatic zones. Agriculture, being a primary economic zone, contributes 18% of India’s GDP and employs 47% of the country’s workforce (Economic survey 2014–15, as stated by Swiss Re Indian Agricultural Insurance Forum). Therefore, significant opportunities exist for reinsurance in India’s agriculture sector.

LAMEA is expected to grow at a significant rate, owing to the region’s immense potential for reinsurance companies. For instance, three reinsurance companies from France, Morocco, and Bermuda have joined forces to establish a reinsurance company called Mamda Re to cover agricultural risks in Moroccan and African markets.

Agriculture Reinsurance Market Segmentation

By Product

• Managed Crop Hail Insurance
• Multi-Peril Crop Insurance
• Livestock Insurance
• Greenhouse Insurance
• Aquaculture Insurance
• Bloodstock Insurance
• Forestry Insurance

 By Geography

• North America
• Europe
• Asia-Pacific
• LAMEA