Russia wildfires highlight need for increased insurance penetration

For its recent report on Russian agriculture, Swiss Re asked the country’s farmers about their fears for the future. Their worst nightmare, they said, was drought and the financial consequences for their livelihoods. Recent weather events have turned these fears into bitter reality. The time has now come to think about how innovative insurance solutions can help soften such blows in the future.

Wheat prices, already at a 22-month high in the wake of drought and wildfires in Russia were sent steeply upward again following Prime Minister Vladimir Putin’s announcement last week of a temporary ban on the country’s exports of grain and other agricultural products.  Russian farmers whose cereal crops have been destroyed in the heat are in desperate straits and consumers face the prospect of rising prices for all flour-related foodstuffs.  According to the Financial Times, some experts are also predicting an upsurge in prices for feeding and malting barley which in turn, they say, could drive up the retail cost of products such as meat and beer.

Even though the Russian government has stepped in to help with subsidies and low cost loans, the loss of income, and indeed their livelihoods, has plunged many farmers into serious financial difficulties, especially since most of them did not have insurance protection. The ad hoc assistance from the government is, of course, vital. But this disaster has highlighted the need for a more systematic policy to help mitigate the financial impact of such events.

Comments Swiss Re’s Reto J Schneider, Head of Agriculture Europe and Africa: “This disaster underscores the need for a concerted strategy on the part of the state, the insurance industry, loan providers and the farming sector to improve insurance penetration significantly to deal with the financial consequences of such events.”

Swiss Re’s recently published report entitled “Sowing the seeds for record harvests: risk reduction a must for Russian agriculture” (see right) highlights the challenges facing the sector. To address these challenges and provide investors with the risk management framework they need, the insurance industry should also consider parametric solutions that permit a hassle-free, cost-effective loss settlement process.

Published 11 November 2012

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Posted by Rashunda Tramble on 26 Jun 2015

This article was published on 12 November 2012. I've just noted this in the story.

Posted by Juan Carlos Sanchez on 25 Jun 2015

Dates ?

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