LONDON, Jan 16 (Reuters) - Farmers have spent 20 percent more on agricultural insurance in recent years to protect against crop losses from increasingly frequent bad weather events, according to reinsurer Swiss Re.
The rise in extreme weather disasters, such as the widespread drought in the United States last year, has reduced food output at a time when the world’s population is expected to grow by a third by 2050, the world’s second biggest reinsurer said in a report on Wednesday.
Global agricultural insurers took in $23.5 billion in annual premiums in 2011, up by a fifth from 2005, in a market dominated by emerging countries, Swiss Re said.
China and India accounted for nearly two-thirds of the $5 billion in premiums paid in emerging countries.
Government-backed initiatives to boost agriculture in emerging markets have helped to increase crop values and commodity prices - increasing the need for insurance, Swiss Re said.
Swiss Re said the agriculture insurance market could still grow fourfold in emerging markets.
The reinsurer also called for “massive investment” in agriculture to reduce hunger in a world struggling with high and volatile food prices and said insurance was a way to introduce private companies to the sector.
Global agricultural production must increase by 60 percent to feed the world’s population, which will reach 9 billion by 2050, the reinsurer said.
About 870 million people, or one in eight of the world’s population, are chronically undernourished, the United Nations food agency said last year, while the UN Food and Agriculture Organisation says the world needs to boost food output by 70 percent by 2050 to meet demand.
More insurance exposure in agriculture could lead to more government-backed insurance programmes, such as microinsurance schemes, which insures low-income people against specific perils in exchange for premiums proportionate to the likelihood and cost of the risk involved, the reinsurer said.
Poor governance, high levels of corruption and high taxation of agriculture are among the many hurdles that reduce incentives for financial backers to invest in the sector, a report from the United Nations Food Agency said last year.