Catalysing a new vision for agriculture

Farmers around the world are benefiting from risk transfer tools such as weather insurance: these help them cope with natural catastrophes that threaten their livelihoods. Some of the world’s poorest countries are exposed to significant risks in their agricultural sectors such as drought, pest and disease. Risk transfer solutions, such as those pioneered by Swiss Re, can be effective in creating a stable, resilient farming industry – and thereby helping to foster growth.

Swiss Re’s Chief Executive Stefan Lippe, together with the Kanayo Nwanze of the International Fund for Agriculture Development, discussed risk transfer for farmers at the World Economic Forum in Davos at an event entitled “Catalysing a new vision for agriculture”.

Agriculture is fraught with risks from the perspective of an investor: profits are at risk from the weather and other perils while the cost of doing business is uncertain because the price of seed, fertilizer and the value of crops and livestock are all highly volatile. A robust risk management framework based on tailored risk transfer instruments is needed to reduce uncertainty.

“No-one can guarantee the weather but Swiss Re has been a pioneer at weather insurance,” said Swiss Re’s head of Environmental and Commodity Markets Juerg Trueb.

In Malawi, one of the world’s poorest countries, Swiss Re and the World Bank created an innovative risk financing transaction which provides the government with 5 million USD in protection should drought destroy the all-important maize crop. In Ethiopia, Swiss Re is also involved in a pilot project to introduce weather insurance for a staple cereal crop.

The potential scale for these kinds of solutions can be seen in the case of India: a weather insurance scheme introduced by Swiss Re with micro-finance institutions and local insurers six years ago sparked growth in a market that now covers 1.5 million people against the negative impact of monsoon rains.

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