The Drivers of Agriculture Insurance in Asia, Part I: Introduction

Peter Book, Head of Agriculture, Asia Pacific Contact Greater demands are being placed on Asia's agricultural sector as the region's rapidly changing economies and their increasingly affluent populations seek to boost living standards. This, in turn, will fuel the development of insurance products necessary to underpin the growth in agriculture.   The factors influencing agriculture production in Asia fall into two broad categories:

• • The reasons why production needs to be increased (increasing demand).
• • The challenges that are limiting production (supply constraints).

Food Production Will Need To At Least Double On the demand side, populations in developing countries are projected to double between the years 2000 and 2050. Food production will need to at least double and as the standard of living improves, there will be greater demand for non-food, agricultural products and animal proteins. For example, consider the Philippines. The graph below provides a forecast of Philippine rice production through to 2050 assuming low, medium and high levels of investment to improve yields. The blue or high investment level reflects an end point where yields approximate those being achieved at research stations in the Philippines. The green block shows the level of rice production required to keep pace with population growth assuming a population growth rate of 1.7 percent. It makes no allowance for increasing consumption as the standard of living improves. On this basis it is apparent that a substantial deficit in rice production can be expected if the status quo is maintained.

Meeting the demand for increased production will be challenging as agriculture competes with urban populations and industry for use of water, land, finance and other resources. Access to capital, technology and risk transfer tools will be critical in meeting the demand and addressing constraints. The question of increasing agriculture production and the issues on the supply and demand side of the equation can be examined in greater detail in the following table.

This article first appeared in the June 2014 edition of Asia Insurance Review and is reprinted here with permission from Asia Insurance Review. Link to Part II>> Link to Part III>> Click here to register to receive e-mail updates>>