Recent years have witnessed a surge in food price inflation, with global food prices soaring by 41% in May 2021 and 34% in March 2022, primarily driven by supply shocks, according to Swiss Re Institute.
The repercussions of these spikes continue to ripple through the food supply chain, affecting consumers worldwide. As a response to these challenges, experts are emphasising the critical need to bolster the resilience of crop production and expand crop insurance coverage.
A recent report by the SRI Crop Insurance Resilience Index (Crop I-RI) highlights that, despite global progress in crop resilience, approximately 60% of insurable crops remained unprotected by insurance in 2022. This protection gap is estimated at a staggering USD 113 billion globally in premium equivalent terms.
The Crop I-RI index reveals a notable correlation between crop insurance resilience and government support for agriculture.
Countries with a higher level of public expenditure on the agriculture sector, relative to its GDP contribution, tend to exhibit greater crop resilience. Furthermore, these nations typically experience lower levels of food insecurity, according to the index.
Crop insurance emerges as a powerful risk management tool to mitigate price volatility, stabilise farmers’ income, enhance resilience against weather-related hazards, and facilitate access to agricultural finance.
Studies focusing on major food producers like China and the United States have showcased the effectiveness of crop insurance in managing agricultural risks.
In countries where governments have actively promoted agriculture and partnered with the private sector, crop insurance initiatives have thrived. For instance, China and Brazil have witnessed significant growth in insurance coverage, recording annual increases of 16% and 9%, respectively.
Government support, including substantial premium subsidies of nearly 80% in some cases, has played a pivotal role in encouraging private sector participation through public-private partnerships (PPPs).
Regionally, emerging Asia has made substantial strides in crop resilience, with a gain of 202 basis points to reach 47% in 2022. This achievement is attributed to a combination of factors, including strong government backing, the expansion of private agricultural insurance providers, and the introduction of innovative products such as Weather Index Based Insurance.
