In lieu of our annual CISAR symposium with European crop insurers in March, we decided to gather findings on priority issues occupying the sector this spring.
Our research revealed that during 2023 there was a significant divergence in crop insurance trading experience. Spain and Italy recorded very negative results and a combined ratio approaching 150%, whilst other markets such as France, Poland and Hungary reported healthy profits. Furthermore, new public-private insurance schemes introduced in France and Italy, together with Spain showed a clear shift to adopt this type of market order for risk financing in Europe.
We found that the predominantly negative market experience over the last five years is leading crop insurers to revisit their own business model and question how innovation and technology can help future product development and enable business growth on a technically sound and sustainable insurance platform.
Peril complexity and climate change are demanding a revolution in risk assessment and risk management. We have learnt that conventional methods and core assumptions of risk modeling and risk management are under strain. Insurers must therefore exploit the opportunities that technology and data-driven underwriting can provide.
We discovered that understanding tech solutions and adapting them to the specific needs in the crop insurance value chain needs to be the focus going forward with a wider sharing of the success stories amongst the agro insurance community. The emphasis needs to be placed on the demand as opposed to the supply of info-tech solutions.
Our estimate is of a cost of reinsurance increase for crop insurers across Europe averaging 20% in 2024. Pressure lies with the insurers to exercise extreme discipline in primary crop insurance underwriting to achieve net profitability. At the same time, index insurance for catastrophe perils is gaining ground in Europe.
Finally, an important recommendation is that links are forged with the work and output of the EU´s European Environmental Agency (EEA) and European Drought Observatory (EDO) to better understand underlying climate risk trends.
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