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Building resilience in the eye of the storm – Agriculture in the Caribbean and Central America
With fertile soils and a conducive climate, Central America and the Caribbean are uniquely positioned to supply farm products to growing markets worldwide.
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Preparing for a growing number of floods and droughts is clearly a first priority. Planting the right crops and managing them with new digital tools for precision farming are further essential measures for farmers to implement.
To establish climate-resilient operations, farmers in Central America and the Caribbean need access to new tools, seeds and other input materials. And this requires support from governments, multilateral donor organisations, NGOs and the private sector.
Governments will not be able to shoulder the financial burden of adopting new resilient practices without additional support, however. Investors must be attracted, and this is where the insurance industry can play a key role. Insurers pay out in the event of a lost harvest, for example, and thus assure lenders that their clients will remain solvent even if disaster strikes. This makes it easier for investors to finance the sector.
What does this imply for agriculture in the region, particularly considering that growing this industry will be key to food security, employment and diversification of the economies in the region
Positive economic outlook with uneven and fragile growth
Global insurance premiums to surpass record USD 7 trillion by mid-2022
We expect above-trend growth rates of insurance premiums in both North America and EMEA regions at 2.4% and 2% annually, respectively, over the next two years. Expansion in emerging markets other than China is expected to be strong with above-trend growth of 5.1% from 2022-2023. We expect China to grow at 7% during this time, up from 1.5% in 2021, largely driven by strong demand for medical insurance, including critical illness covers. In the Asia Pacific region, on the other hand, we expect steady above-trend growth rate of 3.2% up to 2023.
Divergence: between and within countries
Digitisation: market for 'frontier technologies' to grow nearly 10-fold
El Niño
The El Niño weather phenomenon creates challenges for agriculture on a global scale. It is associated with warm and dry conditions affecting farming operations with drought and decreasing yields in southern and eastern inland areas of Australia as well as in Indonesia, the Philippines, Malaysia and central Pacific islands, such as Fiji, Tonga and Papua New Guinea.
During the summer season in the northern hemisphere, the Indian monsoon rainfall tends to be less than normal in an El Niño phase, especially in the north-west of India, prompting a huge challenge to food security in this most populous country of the world.
The ECA process
Growing insurance on virgin territory
Once active risk mitigation is exhausted, insurance is there to help when disaster strikes. Many farmers around the world receive payouts if flood, hail, drought, storms or pests destroy their harvest. This enables them to plant for the next season, thereby keeping the economy going and ensuring food security in general.
As the figure below shows, the protection gap for natural catastrophe losses is large in Latin America, reaching USD 15 billion or more than 60% of the overall losses in 2016. While agriculture makes up only part of this figure, natural catastrophes invariably hit farmers, so it stands to reason that the protection gap in farming is at least as large as it is for the general economy. Protecting farmers in all areas of agricultural activity is therefore key.
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Thomas Wellauer
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