Traditionally, farmers and livestock producers are the ones who buy agriculture insurance. But if you look at the whole process and the whole production chain, you can see that a wide range of companies are exposed to crop shortfall risk.

 

If there is no harvest, there is no money to pay off the companies providing inputs such as seeds and fertilizer. On the processing side, if there are not enough potatoes, factories produce fewer chips. “That is a financial risk that we couldn’t cover in the past with traditional cover”, says René Kunz. “To develop solutions for farmers, food processors or risk aggregators, we need to be able to underwrite and manage risks in a fast, accurate and cost-efficient way”. 

The biggest challenge when it comes to creating new tools is the lack of historical data. Today data is becoming more available (more governments now provide it for free) and easier to manage thanks to larger and cheaper storage capacities. Modelling also benefits from improved calculation capacities.

 

Another challenge lies in the lack of travel infrastructure. Doing things the traditional way, you need (a lot of) loss adjusters traveling around vast areas. The process is both cost and time intensive. Today, to overcome this challenge, we can use modern tools like satellite imagery, drones and remote sensing. Some of these tools are already in use but still offer new possibilities that have yet to be developed. 

 

René Kunz ended his presentation with a description of some real cases involving SCOR’s expertise – for instance the modelling of frost in a Turkish region harvesting hazelnuts for a large food-processing company. You can download his presentation below. You can also access the latest SCOR Technical Newsletters about agriculture here.