The International Association of Agricultural Production Insurers (AIAG) organizes an annual seminar at which insurers and reinsurers come together to discuss issues relating to the assessment of damage to agricultural crops. This year, 80 experts from 12 countries met at the end of February in Cape Town to focus on the assessment of hail damage to apples and plums.
One of AIAG's main objectives is to promote the exchange of experience among insurers, emphasized AIAG President Pascal Forrer at the opening of the seminar in South Africa. He outlined how agriculture worldwide is affected by the consequences of climate change, which also poses major challenges for crop insurers. "The international loss adjusters’ seminars help to connect experts worldwide and to discuss the special requirements for crop production, insurance and, especially, the loss adjustment procedures. In this way, agricultural insurers are making a decisive contribution to safeguarding the livelihoods of farmers and thus the food supply for a growing world population. Due to more frequent extreme weather events as a result of climate change, risk management in the form of crop insurance systems based on public-private partnership (PPP) are increasingly becoming the focus of agricultural policy measures around the world," says AIAG President Forrer.
Assessment of hail damage to apples and plums
The seminar gave all participants the opportunity to carry out the loss adjustment in 8 small groups using the methodology of the South African insurer Santam on simulated hail damage to fruit – this included sample taking, sorting the fruit into the loss classes and calculating the loss ratio. Despite many parallels to German and European loss adjustment procedures, some clear differences also came to light. For example, the assessment is based on a sample size that is three to four times larger than usual. As a rule, the fruit is picked by farm employees and evaluated centrally. In addition to damage classes 1 to 4 for apples and 1 to 3 for plums, Santam also has a "waste" class for fruit with damage by uninsured risks. This is not included in the damage calculation, which means that the loss ratios tend to be slightly higher. In addition, the fruit is weighed in the respective damage classes and not counted, as it is done in most European countries. The perfectly organized seminar offered the participants not only an intensive exchange but also an insight into South African export-oriented fruit growing with very good qualities.
Fruit growing in South Africa – professional fruit production for the world market
Around 710 different varieties are grown professionally by 1,155 producers on an area of 54,271 hectares. Pome fruit is grown on 70% of the area, stone fruit on 30%. Apples (46%), followed by pears (24%) and plums (10%) are the most important fruit crops in terms of acreage. Large commercial and heavily export-oriented farms dominate the South African fruit-growing scene, alongside small family-run businesses, many of which are organized as cooperatives. Around 40% of the total production of 2.16 million tons is exported, especially to Asia and Europe. For nectarines, the export ratio to Europe is as high as 80%. In recent years, the Asian market has become increasingly important for South African fruit producers in a global comparison.
87% of fruit growing takes place in the south of the country, the Western Cape. In the particularly dry regions there, water scarcity is an increasing problem due to climate change with longer periods of drought, as well as unpredictable weather changes and hailstorms, posing enormous challenges for farmers. They are meeting these challenges with technological innovations and preventative measures, such as irrigation technologies or anti-hail nets. Crop insurance is a common risk management tool for professional fruit growers in South Africa, but one that still needs to be developed.
Agricultural insurance market in South Africa - hail is the no. 1 risk
With a premium volume of around EUR 140 million, South Africa accounts for around half of the total premium collected on the African continent. In a global comparison, however, Africa only plays a subordinate role with a share of just under 1% of global premium income (EUR 29.7 billion). In contrast, the agricultural insurance markets in Asia have developed rapidly in recent years (41%) and have now pushed North America (USA and Canada) into second place (40%). Europe is in third place with around EUR 3.7 billion (13%). In South Africa, only loss-based insurance is offered for traditional agricultural crops as well as fruit production and viticulture, with hail being the dominant risk, particularly for specialty crops. Only 30% of South African farmers have taken out crop insurance. This low insurance penetration rate is primarily due to the high costs, as there are currently no state subsidies for crop insurance, meaning that efficient risk protection is simply too expensive for South African farms.
