Swiss Re stated that agricultural insurance penetration in emerging markets is currently very low but potential premiums by 2025 can reach an estimated US$ 15-20 billion. Agricultural insurance is an indispensable part of agricultural risk management and helps to smooth farm income as well as incentivise food investment. Global agricultural production must increase by 60% to feed the world's population, which will reach 9 billion by 2050. Swiss Re's latest sigma research publication, "Partnering for food security in emerging markets" proposes a multi-stakeholder approach to address the problem of food insecurity, putting agricultural insurance on the table to help manage agricultural risks, stabilize farm income, and encourage agricultural investment to strengthen the food chain infrastructure. Food security today means having physical, social, and economic access to sufficient, safe, and nutritious food. But steady population growth, insufficient farm investment, socio-economic instability, and adverse weather events remain key challenges to the world's food supply, often barring people's access to food. Moreover, dietary preferences and nutritional demand are changing and are also putting pressure on food production and availability. Recently, rising food prices have become a major concern due to a combination of complex factors. "Volatile food prices (up 74% since 2005) and supply issues due to the 2012 US drought have heightened food security concerns recently, especially for vulnerable people in emerging markets," explains Clarence Wong, Swiss Re Chief Economist for Asia. Out of the 850 million people suffering from hunger worldwide, 98% are located in emerging markets. The Asia-Pacific region has the greatest number (528 million), followed by sub-Saharan Africa (237 million). Agricultural insurance is growing, especially in emerging markets In 2011, global agricultural insurance premiums were estimated at USD 23.5 billion, around USD 5 billion of which was generated from emerging markets (mostly China and India). Insurance cannot provide food security on its own in emerging markets, but it can play a big part in aligning production incentives, raising awareness of the importance of risk mitigation, and encouraging investment in agricultural efficiency. Farmers and producers, governments, communities, cooperatives, and agribusiness can benefit from risk management solutions offered by re/insurers at multiple levels. Nevertheless, agricultural insurance penetration remains very low and is far from reaching its full potential in emerging markets, estimated at three to four time the current market size. "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 sigma study.
