2

OVERVIEWOVERVIEWOVERVIEWOVERVIEW

� Crop Insurance SystemsCrop Insurance SystemsCrop Insurance SystemsCrop Insurance Systems� Crop Insurance EvolutionCrop Insurance EvolutionCrop Insurance EvolutionCrop Insurance Evolution� Why Index Based Insurance?Why Index Based Insurance?Why Index Based Insurance?Why Index Based Insurance?� Yield Index InsuranceYield Index InsuranceYield Index InsuranceYield Index Insurance� Weather Index InsuranceWeather Index InsuranceWeather Index InsuranceWeather Index Insurance� Modified Yield Index InsuranceModified Yield Index InsuranceModified Yield Index InsuranceModified Yield Index Insurance� Crop Insurance: InnovationsCrop Insurance: InnovationsCrop Insurance: InnovationsCrop Insurance: Innovations

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Crop Insurance Crop Insurance Crop Insurance Crop Insurance Early ThoughtsEarly ThoughtsEarly ThoughtsEarly Thoughts

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� Benjamin Franklin Benjamin Franklin Benjamin Franklin Benjamin Franklin likely first person to have thought about Crop Insurance

� Based on a severe storm of 24th October 1788 in French countryside which destroyed crops, he observed – ‘I have sometimes thought that I have sometimes thought that I have sometimes thought that I have sometimes thought that it might be well to establish an office of insurance for farms against it might be well to establish an office of insurance for farms against it might be well to establish an office of insurance for farms against it might be well to establish an office of insurance for farms against the damage that may occur to them by storms, blight, insects etc. A the damage that may occur to them by storms, blight, insects etc. A the damage that may occur to them by storms, blight, insects etc. A the damage that may occur to them by storms, blight, insects etc. A small sum paid by a number of farms would repair such losses and small sum paid by a number of farms would repair such losses and small sum paid by a number of farms would repair such losses and small sum paid by a number of farms would repair such losses and prevent much distress’ prevent much distress’ prevent much distress’ prevent much distress’

� First crop insurance programme (hail insurance) started in 1820s1820s1820s1820s in France and Germany for GrapesFrance and Germany for GrapesFrance and Germany for GrapesFrance and Germany for Grapes

� First crop insurance programme (hail insurance) in USUSUSUS started in 1883 1883 1883 1883 for tobaccofor tobaccofor tobaccofor tobacco

� The earliest MultiMultiMultiMulti----Peril Crop Insurance (MPCI)Peril Crop Insurance (MPCI)Peril Crop Insurance (MPCI)Peril Crop Insurance (MPCI) started in USUSUSUS in 1939193919391939, with formation of Federal Crop Insurance Corporation (FCIC)Federal Crop Insurance Corporation (FCIC)Federal Crop Insurance Corporation (FCIC)Federal Crop Insurance Corporation (FCIC)

Crop Insurance: Early Thoughts

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Crop Insurance SystemsCrop Insurance SystemsCrop Insurance SystemsCrop Insurance Systems

1. Traditional: (i) Named Peril, (ii) Multi-Peril

2. Index: (i) Yield Index (ii) Weather Index (iii) Crop Health Index

(iv) Multiple Trigger

3. Hybrid (Index Plus): Weather + Named peril

4. Income: Revenue Based

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Why Index Insurance in India?Why Index Insurance in India?Why Index Insurance in India?Why Index Insurance in India?

� Non availability of past record of Yields, Land surveys, Ownership and Non availability of past record of Yields, Land surveys, Ownership and Non availability of past record of Yields, Land surveys, Ownership and Non availability of past record of Yields, Land surveys, Ownership and Tenancy Tenancy Tenancy Tenancy

� Large number of FarmLarge number of FarmLarge number of FarmLarge number of Farm----holdings (nearly 125 million) holdings (nearly 125 million) holdings (nearly 125 million) holdings (nearly 125 million)

� Small size of farmSmall size of farmSmall size of farmSmall size of farm----holdings (Average size of 1.2 hectare)holdings (Average size of 1.2 hectare)holdings (Average size of 1.2 hectare)holdings (Average size of 1.2 hectare)

� Remoteness & inaccessibility of FarmRemoteness & inaccessibility of FarmRemoteness & inaccessibility of FarmRemoteness & inaccessibility of Farm----holdingsholdingsholdingsholdings

� Low value per unitLow value per unitLow value per unitLow value per unit

� Large variety of crops, varied agroLarge variety of crops, varied agroLarge variety of crops, varied agroLarge variety of crops, varied agro----climatic conditions and package of climatic conditions and package of climatic conditions and package of climatic conditions and package of practicespracticespracticespractices

� Difficulty in collection of small amount of premium from large number of Difficulty in collection of small amount of premium from large number of Difficulty in collection of small amount of premium from large number of Difficulty in collection of small amount of premium from large number of farmers farmers farmers farmers

� Simultaneous harvesting of crops all over the country Simultaneous harvesting of crops all over the country Simultaneous harvesting of crops all over the country Simultaneous harvesting of crops all over the country

� Prohibitive cost of Manpower and InfrastructureProhibitive cost of Manpower and InfrastructureProhibitive cost of Manpower and InfrastructureProhibitive cost of Manpower and Infrastructure

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� J S Chakravarthi proposed ‘Drought Insurance’ based on rainfall index in J S Chakravarthi proposed ‘Drought Insurance’ based on rainfall index in J S Chakravarthi proposed ‘Drought Insurance’ based on rainfall index in J S Chakravarthi proposed ‘Drought Insurance’ based on rainfall index in 1920192019201920

� First ever crop insurance started in First ever crop insurance started in First ever crop insurance started in First ever crop insurance started in 1972 1972 1972 1972 for Hfor Hfor Hfor H----4 4 4 4 cotton based on ‘individual cotton based on ‘individual cotton based on ‘individual cotton based on ‘individual farm’farm’farm’farm’

� In In In In 1979 1979 1979 1979 a pilot insurance was introduced based on ‘homogenous area’ based a pilot insurance was introduced based on ‘homogenous area’ based a pilot insurance was introduced based on ‘homogenous area’ based a pilot insurance was introduced based on ‘homogenous area’ based yield index (Pilot Crop Insurance Scheme yield index (Pilot Crop Insurance Scheme yield index (Pilot Crop Insurance Scheme yield index (Pilot Crop Insurance Scheme –––– PCIS)PCIS)PCIS)PCIS)

� In In In In 1985 1985 1985 1985 the PCIS was converted into a countrythe PCIS was converted into a countrythe PCIS was converted into a countrythe PCIS was converted into a country----wide ‘yield index’ based crop wide ‘yield index’ based crop wide ‘yield index’ based crop wide ‘yield index’ based crop insurance covering cereals, millets, pulses and oilseeds (Comprehensive Crop insurance covering cereals, millets, pulses and oilseeds (Comprehensive Crop insurance covering cereals, millets, pulses and oilseeds (Comprehensive Crop insurance covering cereals, millets, pulses and oilseeds (Comprehensive Crop Insurance Scheme Insurance Scheme Insurance Scheme Insurance Scheme –––– CCIS) CCIS) CCIS) CCIS)

� Scope of CCIS expanded in Scope of CCIS expanded in Scope of CCIS expanded in Scope of CCIS expanded in 1999 1999 1999 1999 as National Agricultural Insurance Scheme as National Agricultural Insurance Scheme as National Agricultural Insurance Scheme as National Agricultural Insurance Scheme ––––NAISNAISNAISNAIS

� Weather Based Crop Insurance Scheme Weather Based Crop Insurance Scheme Weather Based Crop Insurance Scheme Weather Based Crop Insurance Scheme –––– WBCIS was introduced from WBCIS was introduced from WBCIS was introduced from WBCIS was introduced from 2007200720072007

� Modified NAIS Modified NAIS Modified NAIS Modified NAIS –––– 50 50 50 50 districts from Rabi districts from Rabi districts from Rabi districts from Rabi 2010201020102010----11 11 11 11 seasonseasonseasonseason

Evolution of Crop Insurance

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IndiaIndiaIndiaIndia

Index Based Crop InsuranceIndex Based Crop InsuranceIndex Based Crop InsuranceIndex Based Crop Insurance

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National Agricultural Insurance Scheme [NAIS]National Agricultural Insurance Scheme [NAIS]National Agricultural Insurance Scheme [NAIS]National Agricultural Insurance Scheme [NAIS](Government’s flagship Yield index Crop Insurance Program)(Government’s flagship Yield index Crop Insurance Program)(Government’s flagship Yield index Crop Insurance Program)(Government’s flagship Yield index Crop Insurance Program)

� Introduced in 1999 and presently in operation countrywide Introduced in 1999 and presently in operation countrywide Introduced in 1999 and presently in operation countrywide Introduced in 1999 and presently in operation countrywide � AreaAreaAreaArea----Yield Guarantee Yield Guarantee Yield Guarantee Yield Guarantee � Homogenous Area approachHomogenous Area approachHomogenous Area approachHomogenous Area approach� Available to all Farmers Available to all Farmers Available to all Farmers Available to all Farmers ---- compulsory for borrowing & optional for noncompulsory for borrowing & optional for noncompulsory for borrowing & optional for noncompulsory for borrowing & optional for non----

borrowing borrowing borrowing borrowing � Covers Food crops, Oilseeds & Annual Commercial / Horticultural CropsCovers Food crops, Oilseeds & Annual Commercial / Horticultural CropsCovers Food crops, Oilseeds & Annual Commercial / Horticultural CropsCovers Food crops, Oilseeds & Annual Commercial / Horticultural Crops� Indemnity levels vary from 60% to 90% of past average yieldIndemnity levels vary from 60% to 90% of past average yieldIndemnity levels vary from 60% to 90% of past average yieldIndemnity levels vary from 60% to 90% of past average yield� Sum Insured Sum Insured Sum Insured Sum Insured ---- Loan amount to 150% of value of YieldLoan amount to 150% of value of YieldLoan amount to 150% of value of YieldLoan amount to 150% of value of Yield� Premium ratesPremium ratesPremium ratesPremium rates

� Food crops & Oilseeds Food crops & Oilseeds Food crops & Oilseeds Food crops & Oilseeds –––– ranges from 1.5% to 3.5% ranges from 1.5% to 3.5% ranges from 1.5% to 3.5% ranges from 1.5% to 3.5%

� Annual Commercial / Horticultural Crops Annual Commercial / Horticultural Crops Annual Commercial / Horticultural Crops Annual Commercial / Horticultural Crops –––– ActuarialActuarialActuarialActuarial

� Indemnities exceeding Premium (food crops & oilseeds) and 150% of Indemnities exceeding Premium (food crops & oilseeds) and 150% of Indemnities exceeding Premium (food crops & oilseeds) and 150% of Indemnities exceeding Premium (food crops & oilseeds) and 150% of Premium (commercial crops) are borne by the GovernmentPremium (commercial crops) are borne by the GovernmentPremium (commercial crops) are borne by the GovernmentPremium (commercial crops) are borne by the Government

NAIS: How it Works?NAIS: How it Works?NAIS: How it Works?NAIS: How it Works?

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National Agricultural Insurance Scheme (NAIS):

Progress

SEASONFARMERS COVERED (LAKHS)

AREA (LAKH HA.)

Rs CRORE FARMERS BENEFITTEDSUM

INSUREDPREMIUM SUBSIDY CLAIMS

Kharif 2010 126.84 171.95 23705.09 721.65 45.40 1626.96 2235063

Rabi 2010-11 48.97 68.56 10691.98 288.04 88.95 577.38 1065476

2010-11 175.81 240.51 34397.07 1009.69 134.35 2204.34 3300539

Kharif 2011 114.13 153.47 23368.78 711.54 48.52 Claims under Process

Rabi 2011-12 45.50 65.55 10000.00 275.00 75.00 Risk on

2010-11 159.63 219.02 33368.78 986.54 123.52

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Challenges of Yield Index InsuranceChallenges of Yield Index InsuranceChallenges of Yield Index InsuranceChallenges of Yield Index Insurance

� Basis RiskBasis RiskBasis RiskBasis Risk� Adverse impact of bad crop years on Threshold YieldsAdverse impact of bad crop years on Threshold YieldsAdverse impact of bad crop years on Threshold YieldsAdverse impact of bad crop years on Threshold Yields� Available only for crops with historical yield dataAvailable only for crops with historical yield dataAvailable only for crops with historical yield dataAvailable only for crops with historical yield data� Delay in payment of claimsDelay in payment of claimsDelay in payment of claimsDelay in payment of claims� NonNonNonNon----availability of coverage for preavailability of coverage for preavailability of coverage for preavailability of coverage for pre----sowing & postsowing & postsowing & postsowing & post----harvest harvest harvest harvest

losseslosseslosseslosses

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Weather Index InsuranceWeather Index InsuranceWeather Index InsuranceWeather Index Insurance

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� J S J S J S J S ChakravarthiChakravarthiChakravarthiChakravarthi the PioneerPioneerPioneerPioneer of Rainfall Insurance, was the Secretary and PresidentSecretary and PresidentSecretary and PresidentSecretary and President of the Mysore State Insurance Mysore State Insurance Mysore State Insurance Mysore State Insurance CommitteeCommitteeCommitteeCommittee since 1909

� He published work on Rainfall InsuranceRainfall InsuranceRainfall InsuranceRainfall Insurance based on study of ChitradurgaChitradurgaChitradurgaChitradurga district in Mysore Economic JournalMysore Economic JournalMysore Economic JournalMysore Economic Journal during 1915191519151915----1917191719171917

� He presented a paper on ‘Agriculture InsuranceAgriculture InsuranceAgriculture InsuranceAgriculture Insurance’ in 1917191719171917 at a conferenceconferenceconferenceconference of the Indian Science CongressIndian Science CongressIndian Science CongressIndian Science Congress at BangaloreBangaloreBangaloreBangalore

� He published a book entitled ‘Agriculture Insurance: A Practical Agriculture Insurance: A Practical Agriculture Insurance: A Practical Agriculture Insurance: A Practical Scheme Suited to Indian Conditions’ in 1920Scheme Suited to Indian Conditions’ in 1920Scheme Suited to Indian Conditions’ in 1920Scheme Suited to Indian Conditions’ in 1920

Rainfall Insurance: Pioneering Work by J S Chakravarthi

Weather Indexed Parameters

� Rainfall: Deficit rainfall, Consecutive Dry

Days (CDD), Rainy Days, Excess rainfall,

Consecutive Wet Days (CWD)

� Temperature: Max. Temperature (heat),

Min. Temperature (frost), Mean

Temperature, Hourly Chilling units

� Relative Humidity

� Wind Speed

� Disease proxy: Combination of rainfall,

temperature & humidity

Weather Insurance: CropsS.NO. CROP SEASON S.NO CROP SEASON

1 Paddy Kharif & Rabi 1 Potato Rabi

2 Sorghum Kharif 2 Coriander Rabi

3 Pearl millet Kharif 3 Cumin Rabi

4 Maize (Corn) Kharif 4 Fenugreek Rabi

5 Finger millet Kharif 5 Isabgol Rabi

6 Wheat Rabi 6 Onion Kharif

7 Barley Rabi 7 Chilly Kharif-Rabi

8 Cotton Kharif

1 Blackgram Kharif 9 Tomato Kharif & Rabi

2 Greengram Kharif 10 Banana Annual

3 Pigeon Pea Kharif

4 Chick Pea Rabi 1 Grapes Rabi

2 Mango Rabi

1 Groundnut Kharif 3 Cashewnut Rabi

2 Soyabean Kharif 4 Pepper Kharif

3 Linseed Rabi 5 Apple Rabi

4 Rape Seed & Mustard Rabi 6 Coffee Annual

5 Sunflower Kharif 7 Orange Annual

6 Sesamum Kharif 8 Oil Palm Annual

OILSEEDS

PULSES

CEREALS & MILLETS COMMERCIAL CROPS

PERENNIAL HORT. CROPS

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Pilot WBCIS

Crop: Groundnut Season: Kharif

PHASE-I PHASE - II PHASE – III

1 A. Rainfall Volume

PERIOD 21st June to

15th July

16th July to

15th Aug

16th Aug to

30th Sept

TRIGGER I (<) 80 mm 160 mm 80 mm

TRIGGER II (<) 40 mm 80 mm 40 mm

EXIT 20 30 20

RATE I (Rs./ mm) 25 25 25

RATE II (Rs./ mm) 75 60 75

Max. Payout (Rs.) 2500 5000 2500

TOTAL PAYOUT (Rs.) 10000

1 B.

Rainfall

Distribution

(Consecutive Dry Days)

PERIOD 1st July to 31st August

TRIGGER DAYS (>=) 20 25 30

PAYOUT (Rs.) 1500 3000 5000

TOTAL

PAYOUT (Rs.) 5000

Rainfall of less than 2.5 mm in a day shall not be considered as a rainy day; and multiple payouts considered

Max. Payout (Rs.) 15000

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Pilot Weather Index Crop Insurance: Progress

S.No.Year State District Farmers

Covered

(Lakhs)

Area

(Ha.)

Lakhs

Sum

Insured

(Rs Cr.)

Farmer

premium

(Rs Cr.)

Gross

Premium

(Rs Cr.)

Claims

approved

(Rs. Cr.)

12007-08

5 346.86 10.68 1791.91 45.19 148.35 107.44

22008-09

14 913.98 4.82 887.43 20.83 81.69 49.48

3 2009-10 13 14322.79 33.99 4943.09 116.96 444.23 344.93

4 2010-11 17 199 92.72 131.08 14835.00 346.92 1166.61 502.12

5 2011-12 17 230 112.82 156.31 20214.81 537.34 1840.45 656.89

Note: Claims figures for 2011-12 is incomplete

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� Basis Risk1 Basis Risk1 Basis Risk1 Basis Risk1 ---- Product Design ComplexityProduct Design ComplexityProduct Design ComplexityProduct Design Complexity� Basis Risk2 Basis Risk2 Basis Risk2 Basis Risk2 ---- Inadequate Weather Station Density Inadequate Weather Station Density Inadequate Weather Station Density Inadequate Weather Station Density � Data CalibrationData CalibrationData CalibrationData Calibration� Scope limited to Parametric WeatherScope limited to Parametric WeatherScope limited to Parametric WeatherScope limited to Parametric Weather� Climate Change & Seasonal ForecastsClimate Change & Seasonal ForecastsClimate Change & Seasonal ForecastsClimate Change & Seasonal Forecasts� Weather CyclesWeather CyclesWeather CyclesWeather Cycles

Weather Insurance Weather Insurance Weather Insurance Weather Insurance ---- ChallengesChallengesChallengesChallenges

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Modified Yield Index InsuranceModified Yield Index InsuranceModified Yield Index InsuranceModified Yield Index Insurance

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Pilot on Modified NAISPilot on Modified NAISPilot on Modified NAISPilot on Modified NAIS� Premium rates actuarial, supported by upPremium rates actuarial, supported by upPremium rates actuarial, supported by upPremium rates actuarial, supported by up----front subsidy in premium & front subsidy in premium & front subsidy in premium & front subsidy in premium &

Insurer responsible for the claim liabilitiesInsurer responsible for the claim liabilitiesInsurer responsible for the claim liabilitiesInsurer responsible for the claim liabilities� Insurance unit for major crops is village panchayat or any other Insurance unit for major crops is village panchayat or any other Insurance unit for major crops is village panchayat or any other Insurance unit for major crops is village panchayat or any other

equivalent unitequivalent unitequivalent unitequivalent unit� In case of prevented / failed sowing, claims upto 25% of the sum In case of prevented / failed sowing, claims upto 25% of the sum In case of prevented / failed sowing, claims upto 25% of the sum In case of prevented / failed sowing, claims upto 25% of the sum

insured is payable, and insurance cover ceases therafterinsured is payable, and insurance cover ceases therafterinsured is payable, and insurance cover ceases therafterinsured is payable, and insurance cover ceases therafter� Post harvest losses caused by cyclonic rains are assessed at farm Post harvest losses caused by cyclonic rains are assessed at farm Post harvest losses caused by cyclonic rains are assessed at farm Post harvest losses caused by cyclonic rains are assessed at farm

level for the crop harvested and left in ‘cut & spread’ condition level for the crop harvested and left in ‘cut & spread’ condition level for the crop harvested and left in ‘cut & spread’ condition level for the crop harvested and left in ‘cut & spread’ condition � Individual farm level assessment of losses to be done in case of Individual farm level assessment of losses to be done in case of Individual farm level assessment of losses to be done in case of Individual farm level assessment of losses to be done in case of

localized calamities, like hailstorm and landslide localized calamities, like hailstorm and landslide localized calamities, like hailstorm and landslide localized calamities, like hailstorm and landslide � OnOnOnOn----account payment up to 25% of likely claim will be released as account payment up to 25% of likely claim will be released as account payment up to 25% of likely claim will be released as account payment up to 25% of likely claim will be released as

advance, for providing immediate relief to farmers in case of severe advance, for providing immediate relief to farmers in case of severe advance, for providing immediate relief to farmers in case of severe advance, for providing immediate relief to farmers in case of severe calamities calamities calamities calamities

� Threshold yield will be based on average yield of past seven years, Threshold yield will be based on average yield of past seven years, Threshold yield will be based on average yield of past seven years, Threshold yield will be based on average yield of past seven years, excluding upto two years of declared natural calamities excluding upto two years of declared natural calamities excluding upto two years of declared natural calamities excluding upto two years of declared natural calamities

� Coverage levels are 70%, 80% & 90% corresponding to high risk, Coverage levels are 70%, 80% & 90% corresponding to high risk, Coverage levels are 70%, 80% & 90% corresponding to high risk, Coverage levels are 70%, 80% & 90% corresponding to high risk, medium risk & low risk crops / areas medium risk & low risk crops / areas medium risk & low risk crops / areas medium risk & low risk crops / areas

Modified NAIS: How it Works?Modified NAIS: How it Works?Modified NAIS: How it Works?Modified NAIS: How it Works?

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Pilot Modified NAIS

Season Farmers (Lakhs)

Area (Lakh Ha.)

Sum-insured (Rs. Cr.)

Farmers' Prem. (Rs. Cr)

Total Prem. (Rs. Cr.)

Kharif 2011 4.27 6.94 1342.48 49.02 114.85

Rabi 2011-12 6.57 5.88 1945.00 66.90 185.00

2011-12 10.84 11.82 3287.48 115.92 299.85

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Crop Insurance: WTO and IPCCCrop Insurance: WTO and IPCCCrop Insurance: WTO and IPCCCrop Insurance: WTO and IPCC

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Crop Insurance and WTOCrop Insurance and WTOCrop Insurance and WTOCrop Insurance and WTO� World Trade Organization (WTO) legislation has arguably had a major

influence in promoting the spread of government-subsidized agricultural insurance since the Uruguay Round (1994), specifically by exempting agricultural insurance premium subsidies from the list of state aid and subsidies that have to be reduced or eliminated

� Agricultural premium subsidies are conceptually included under the GREEN BOX

� WTO legislation has had two main effects:

� First, it has increased the levels of government premium subsidy support in countries that already provided subsidized crop insurance, includes both the United States and the EU member states, which have some of the highest premium subsidy support levels anywhere in the world;

�Since 2000 it has led to the introduction of government-sponsored agricultural insurance premium subsidy programs in many countries, including Brazil, Chile, China, France, the Republic of Korea, Senegal, and Turkey

Insurance and the Climate Change

� Insurance is mentioned as a Climate Risk Management tool in the 1992 UNFCCC (Article 3.14), the 1997 Kyoto Protocol (Article 4.8), and the 2007 Bali Action Plan (adopted at COP13);

� Bali Action Plan calls for “consideration of risk sharing and transfer mechanisms, such as insurance” to address loss and damage in developing countries particularly vulnerable to climate change (Decision -/CP.13, Bali Action Plan);

� At the 2008 climate talks in Poznan (Poland), insurance was one of the major items of discussion on the adaptation agenda, promoted in proposals by various parties. Insurance was mentioned over two dozen times in the draft text, which served as a starting point for negotiators;

� Many elements proposed between Bali and Poznan must now be combined into a coherent framework that will become the agreement on how the international community mitigates and adapts to climate change after 2012, when the current Kyoto Protocol commitment period ends;

� A UNFCCC pre-negotiation text called for Parties to consider the establishment of an insurance mechanism to facilitate disaster risk reduction and climate adaptation, to identify funds to pay for such insurance activities, and to identify a suitable operational arrangement for implementing insurance solutions

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Agriculture Insurance as Risk Management Agriculture Insurance as Risk Management Agriculture Insurance as Risk Management Agriculture Insurance as Risk Management Tool: Global Tool: Global Tool: Global Tool: Global Scenario Scenario Scenario Scenario

Agricultural Insurance Overview (2009) 30

Aus & NZ, US$ 112 Mio (0.6%)

Asia, US$ 3.,800 Mio (19,7%)

Europe, US$ 3,900 Mio (20.1%)

Africa, US$ 55MM(0,3%)

LAC, US$ 721 Mio (3.5%)

USA & Canada, US$ 10,700 Mio (55,6%)

Agricultural Insurance Premiums: Geographic Distribution

�Premiums : US$ 19.4 billons (estimated)

�USA , China, and Canada: 66% of the premium volume

�BRIC countries are gaining importance (US$ 3. billons)

�MPCI is the most agricultural insurance product

Government expenditures in agricultural insurance

31

USA & Canada: US$ 7,800 Mio (73% of the total Agricultural Insurance Premiums)

LAC: US$ 260 Mio (36% of the total Agricultural Insurance Premiums)

Asia: US$ 1,800 Mio (50% of the total Agricultural Insurance Premiums)

Europe: US$ 1,500 Mio (37% of the total Agricultural Insurance Premiums)

Africa: US$ 1 Mio (3% of the total Agricultural Insurance Premiums)

Australia & NZ: US$ 0 Mio (0% of the total Agricultural Insurance Premiums)

In average, the estimated public sector expenditures in agricultural insurance (US$ 11.5 billions) accounting for 59% of the total premiums written worldwide in 2009

Estimated Government Expenditures in Agricultural Insurance: Geographic Distribution

Potential roles of the Government in providing support to agricultural insurance

32

Provide Legal & Regulatory Framework

Enhancing Data & Information Systems

Education and Capacity Building

Research & Development (Products)

Public Premium Subsidies

Catastrophic Risk Sharing / Risk Financing

Potential Government

rolesin supporting agricultural insurance

Agriculture InsuranceAgriculture InsuranceAgriculture InsuranceAgriculture InsuranceGlobal Picture of Global Picture of Global Picture of Global Picture of DeDeDeDe----risking Agriculturerisking Agriculturerisking Agriculturerisking Agriculture

CountryTop

Economy

Agrl.

GDP

AGDP to

GDP

Sum

insured

Proportion

of AGDP

insured

Proportion

of cropped

area

insured

AGDP: Area

insured

ratio

USA 1 161.236 1.10% 78.094 48.38% 90.00% 54%

Canada 9 34.629 2.20% 14 40.43% 63.00% 64%

Spain 12 46.529 3.30% 16 34.39% 46.50% 74%

China 2 599.582 10.20% 52.14 8.70% 16.92% 51%

Brazil 7 142.141 5.80% 4.716 3.32% 10.18% 33%

Russia 11 58.603 4.00% 7 11.94% 16.21% 74%

Japan 3 76.424 1.40% 24.00 31.40% 45.13% 70%

India 10 284.524 16.50% 11.97 4.21% 19.50% 22%

1. Agriculture GDP figures are adopted from CIA World Fact Book, 2010 & FAO Stat 2010

2. India’s Agriculture Insurance figures are collected from AIC, and the US $ conversion is done

at INR 45/ US $ for 2010

3. Agriculture Insurance figures for other countries are taken from ‘Global Agriculture

Insurance and Government Support’ by World Bank, 2010; Munich Re & Guy Carpenter

(US $ Billions)

34

Crop Insurance: New InitiativesCrop Insurance: New InitiativesCrop Insurance: New InitiativesCrop Insurance: New Initiatives

� IndexIndexIndexIndex PlusPlusPlusPlus InsuranceInsuranceInsuranceInsurance:::: PilotPilotPilotPilot introducedintroducedintroducedintroduced inininin 2011201120112011 forforforfor GrapesGrapesGrapesGrapes inininin NasikNasikNasikNasik (weather(weather(weather(weather indexindexindexindex ++++hailstormhailstormhailstormhailstorm risk)risk)risk)risk) andandandand AppleAppleAppleApple inininin ShimlaShimlaShimlaShimla (weather(weather(weather(weather indexindexindexindex ++++ cloudcloudcloudcloud----burstburstburstburst &&&& hailstormhailstormhailstormhailstorm losses)losses)losses)losses)

� AICAICAICAIC launchedlaunchedlaunchedlaunched aaaa pilotpilotpilotpilot inininin aaaa fewfewfewfew areasareasareasareas ofofofof MaharashtraMaharashtraMaharashtraMaharashtra &&&& RajasthanRajasthanRajasthanRajasthan forforforfor MNAISMNAISMNAISMNAIS wherewherewherewhere GPSGPSGPSGPSenabledenabledenabledenabled cellphonescellphonescellphonescellphones areareareare deployeddeployeddeployeddeployed totototo bebebebe usedusedusedused bybybyby ‘primary‘primary‘primary‘primary workers’workers’workers’workers’ whilewhilewhilewhile conductingconductingconductingconducting cropcropcropcropestimationestimationestimationestimation surveyssurveyssurveyssurveys

� SavingsSavingsSavingsSavings linkedlinkedlinkedlinked (loyalty(loyalty(loyalty(loyalty bonus)bonus)bonus)bonus) weatherweatherweatherweather insuranceinsuranceinsuranceinsurance forforforfor nonnonnonnon----loaneeloaneeloaneeloanee farmersfarmersfarmersfarmers scheduledscheduledscheduledscheduled asasasaspilotpilotpilotpilot duringduringduringduring KharifKharifKharifKharif 2012201220122012

� ‘Double‘Double‘Double‘Double Trigger’Trigger’Trigger’Trigger’ insuranceinsuranceinsuranceinsurance conceptconceptconceptconcept underunderunderunder consideration,consideration,consideration,consideration, inininin whichwhichwhichwhich aaaa combinationcombinationcombinationcombination ofofofof‘weather‘weather‘weather‘weather index’index’index’index’ andandandand ‘yield‘yield‘yield‘yield index’index’index’index’ complimentcomplimentcomplimentcompliment eacheacheacheach otherotherotherother inininin providingprovidingprovidingproviding reasonablyreasonablyreasonablyreasonablycomprehensivecomprehensivecomprehensivecomprehensive protectionprotectionprotectionprotection.... EEEE....gggg.:.:.:.: weatherweatherweatherweather indexindexindexindex coverscoverscoverscovers onlyonlyonlyonly parametricparametricparametricparametric weatherweatherweatherweather exigenciesexigenciesexigenciesexigencieslikelikelikelike rainfall,rainfall,rainfall,rainfall, temperaturetemperaturetemperaturetemperature etcetcetcetc....,,,, andandandand isisisis quitequitequitequite effectiveeffectiveeffectiveeffective totototo givegivegivegive quickquickquickquick payout,payout,payout,payout, whilewhilewhilewhile yieldyieldyieldyield indexindexindexindexbeingbeingbeingbeing ‘comprehensive’‘comprehensive’‘comprehensive’‘comprehensive’ cancancancan covercovercovercover thethethethe residualresidualresidualresidual risk,risk,risk,risk, includingincludingincludingincluding nonnonnonnon----parametricparametricparametricparametric weatherweatherweatherweatherexigenciesexigenciesexigenciesexigencies likelikelikelike hail,hail,hail,hail, thunderstorm,thunderstorm,thunderstorm,thunderstorm, flooding,flooding,flooding,flooding, pestspestspestspests &&&& diseasesdiseasesdiseasesdiseases etcetcetcetc....

� AICAICAICAIC totototo launchlaunchlaunchlaunch aaaa studystudystudystudy duringduringduringduring 2012201220122012 (Maharashtra)(Maharashtra)(Maharashtra)(Maharashtra) whereinwhereinwhereinwherein TOPSTOPSTOPSTOPS technologytechnologytechnologytechnology shallshallshallshall bebebebe usedusedusedusedtotototo generategenerategenerategenerate weatherweatherweatherweather datadatadatadata (historical(historical(historical(historical andandandand present)present)present)present) atatatat villagevillagevillagevillage level,level,level,level, andandandand yieldyieldyieldyield estimatesestimatesestimatesestimates atatatatsubsubsubsub----districtdistrictdistrictdistrict levellevellevellevel

� AICAICAICAIC partneringpartneringpartneringpartnering withwithwithwith IRRI,IRRI,IRRI,IRRI, GIZ,GIZ,GIZ,GIZ, TNAUTNAUTNAUTNAU &&&& SARMAPSARMAPSARMAPSARMAP forforforfor aaaa projectprojectprojectproject onononon paddypaddypaddypaddy inininin TamilnaduTamilnaduTamilnaduTamilnadu ininininsatellitesatellitesatellitesatellite imageryimageryimageryimagery basedbasedbasedbased yieldyieldyieldyield estimationestimationestimationestimation

Crop Insurance: New InitiativesCrop Insurance: New InitiativesCrop Insurance: New InitiativesCrop Insurance: New Initiatives

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