Crop Insurance Today Fourth Quarter 2022 - 25

percent of the total (the U.S. being slightly ahead
of China), while India's share was 12.4 percent
and Canada's share remained less than five percent.
The other countries with sizable premiums
included Spain, Japan, South Korea, France, Brazil,
and Italy.
Since 2019, the U.S. premium volume increased
markedly mostly due to the elevated crop
prices and price risk (volatility factor) on the crop
side and product introductions and increased
premium support on the livestock side. In 2022,
the premium volume under the standard (mostly
crops) and livestock books of business reached
$18.4 billion and $849.7 million, up 81.3 percent
and 739 percent from the 2019 levels, respectively.
Major crops were well covered: the participation
rate stood at 89 percent and the share of
coverage levels at 70 percent and higher (within
the insured acres) stood at 88.2 percent in 2021.
The liability for specialty crops (fruits and nuts,
vegetables and herbs, nursery, apiculture, and
Whole Farm Revenue Protection) reached $24
billion in 2022. Participation in fruits and nuts,
and vegetables stood at 67 percent and 76 percent
as of 2020, well ahead of other countries. As for
the forage, Pasture, Rangeland, Forage Rainfall
Index (PRF-RI), which was introduced in 2007,
has expanded in recent years, protecting $6.2
billion in liability in 2022. Some Western states,
which have been in a drought, reached about a
50 percent participation rate with the PRF-RI.
While the U.S. crop insurance program has been
making great strides in livestock, specialty crop,
and forage areas, more participation at higher
coverage levels is needed for more effective protection
in these areas.
In China, agricultural insurance saw rapid
growth since 2007. The premium volume was estimated
to reach $14.2 billion (near the U.S. level)
in 2021 and $16.3 billion in 2022. The highest
premiums were collected in forestry and livestock
areas. Forestry insurance experienced gradual and
steady growth, while livestock insurance saw rapid
growth in recent years. The participation rates in
forestry were about 70 percent while that for livestock
lay in the range of 50-60 percent, depending
on the animal. On the crop side, the participation
rates for grain crops (rice, corn, wheat), cotton,
and sugarcane participation rates were above 70
percent, while oilseed crops had 50 percent participation
rates. High governmental premium
support combined with product and service innovations
and solutions appear to be the drivers of
continuous growth in this country.
Africa's economies heavily
depend on agriculture as a
source of employment as well
as its contribution to gross
domestic product.
The Latin America region reached about $1.1
billion in premium volume in 2019. Brazil, Argentina,
and Mexico represented 89 percent of
that market. In the last decade, Brazil and Argentina
emerged among the top exporters of grain
crops, such as corn and soybeans, even though
the insurance presence in these countries has
been low compared with the United States. In
addition, drought (and frost) in Brazil and Argentina
in the last three years adversely affected
the yield potential. Brazil is the most generous
among the three in terms of premium support.
In Argentina, the bulk of the business has been
on private crop hail and, historically, any government
support has been minimal. In Mexico,
the governmental premium support has recently
been eliminated. This may adversely affect the
growth of agricultural insurance (other than crop
hail) in that country. In Latin America, agriculture
as a sector has been a significant contributor
to the gross domestic product amid high population
growth. There is considerable potential to
ramp up food production as well as for the expansion
of agricultural insurance in the region.
Africa represents a very small portion of the
global premium. The continent's premium potential
was estimated at $710 million, yet the
current premium volume remained short of that
at $320 million. Nearly half of that current premium
volume is found in South Africa. In this
country, insurance has more than 100 years of
history, no premium support is provided by the
government, and, the book of business is concentrated
on crop hail. Efforts are underway in
piloting a soil moisture index product, which,
if successful, will be the first index insurance in
the market. In addition, East Africa is viewed as
having potential for insurance development. In
particular, the governments of Kenya and Uganda
decided to provide premium support to make
insurance more available and affordable for small
farmers. That along with informational and educational
activities appear to be making a difference.
The continent's economies heavily depend
on agriculture as a source of employment as well
as its contribution to gross domestic product. The
advent of climate change has been posing more
serious and frequent risks relative to other parts
of the world and threatening the livelihoods of
farmers on the continent.
In Europe, Spain, France, and Italy represented
the major markets as their combined premium
volume reached $2.1 billion in 2019. The European
Union's new Common Agricultural Policy (CAP)
over the period 2023-2027 includes risk management
and insurance as one of the policy tools and
allows member countries to support farmers' premiums
within some broad limits. Currently, there
is a large variation among member countries in
terms of premium support provided, including
no support in Ireland, 50 percent in Spain, 45-65
percent in France, and 65-70 percent in Italy. As
part of sector-specific programs, fruits and vegetables
and grapes can be protected through crop
insurance in the form of production or harvest
insurance which requires weather-related causes
of loss. France, Netherlands, Italy, and Portugal allocated
substantial amounts to risk management
within their rural development program funds. In
particular, French multi-peril crop (yield) insurance
(MPCI)-which has seen low participation
and high loss ratios in recent years-is at the onset
of reform starting next year. Europe has been in a
historic drought since last summer. Back-to-back
late spring frost losses were also experienced. The
war in Ukraine contributed to price uncertainty
and created additional challenges. All these factors
along with lower direct payments create momentum
for agricultural insurance in policy considerations.
The use of digital technology and technical
knowledge in adjusting the damages appears to be
the key factors for success going forward.
Index Products
and Technological
SolutionsAgricultural
index
insurance
experienced
considerable growth from representing three
percent of the global premium in 2009 to 12 percent
in 2019.⁵ The expectation has been that the
expanded remote sensing technologies (via satellites)
combined with field-level validation can
result in better index products, which in turn
would accelerate the growth of such products.
Satellite remote sensing technologies can be
of two types: optical or radar-based. Optical satellites
measure the greenness (health) of a canopy
CROPINSURANCE TODAY®
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Crop Insurance Today Fourth Quarter 2022

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