With adverse weather wrecking havoc on farmers across Europe, we take a look at what insurers can do to help stabilise food prices and improve food security worldwide.
Earlier in the month we focussed on how adverse weather in the UK has led to increased flooding, causing havoc for home and business owners throughout the country.
The Association of British Insurers (ABI) is still in on going negotiations with the Government with regards to securing an agreement on renewing flood insurance premiums.
Despite sluggish progress towards a resolution, the National Farmers’ Union (NFU) is reaching out to policy-makers, requesting that the interests of the agricultural industry be kept in mind through implementing a subsidised flood insurance policy for at-risk farms.
A report published earlier this month by the Institution of Mechanical Engineers (IME), it was estimated that between 30-50% of all food produced worldwide is soiled, contaminated, lost and wasted before it reaches consumers. This includes damage caused by extreme weather such as flooding – spoiling crops, land and infrastructure.
Global need for agricultural insurance
Within emerging economies, such as those seen in China or India, the primary causes for food insecurity include adverse weather and poor infrastructure leading to inadequate transportation and storage.
Proposing a multi-stakeholder approach, Swiss Re suggests addressing the problem of food security by first employing a holistic risk management strategy to agricultural industry regions, aiming to reduce, mitigate and cope with farm risks.
They propose that by managing agricultural risk through increased insurance coverage, the income of individual farms will improve, and investment into agricultural programs will increase.
“Tapping the full power of agricultural insurance in emerging markets requires a lot: proactive and enabling government policies, supportive infrastructure, innovative products, cost-effective business models, new distribution channels, and advanced technology. Much of this can be achieved by partnering with insurers,” says Amit Kalra, a co-author of the Swiss Re sigma study.
While the current footprint of agricultural insurance in emerging economies is relatively low, the potential premiums in 2025 can reach an estimated USD $15-20 billion. Although agricultural insurance cannot be singularly responsible for providing food security in emerging economies, it can offer a huge incentive for investment, while protecting farmers and helping to stabilise volatile global food prices.
- Previously: Flood defence negotiations run dry