The opportunity to find ways of producing more food in an efficient manner to feed a growing global population is knocking at our doors. In 30 years we can expect nine billion people in the world. This means we will need to increase food production by 60 percent. Demand is not just for more food, but also for better quality food.
In order to meet the increasing demand - land, water and natural habitat are needed. Latin America and the Caribbean has nearly one third of the global arable land and fresh water globally. In fact, the region has more potentially suitable land for rainfed cultivation than the combined land from all other regions excluding sub-Saharan Africa.
With limited available land worldwide and the need to preserve our natural environment, a major part of food production growth must come from recovered degraded lands and from higher yields in current agricultural areas. The pressure is for sustainable low carbon agriculture, with efficient utilisation of non-renewable resources and rational use of inputs such as pesticides and fertilisers.
As an open sky industry, agriculture is exposed to climatic events like droughts, frosts and floods that can affect production. Today there is near wide-spread consensus on climate change and its potential impacts. Going forward, we can expect more frequent and more extreme weather events. At the same time, increase in pests and diseases affecting crops and livestock are likely to occur due to a faster spread due to increased temperatures.
Reducing the gap between potential and actual yields and adapting to new environmental conditions while meeting an increasing demand for good quality products from consumers, will only come with heavy investments.
Farmers are not able to invest in new expensive technologies when there are high chances of losing their investment, or even their farm, due to a natural catastrophe or price volatility. Not even the financial institutions are keen on lending money to a highly volatile business.
Risk transfer solutions such as revenue insurance protect farmers' operation while offering the needed comfort to financial institutions when a natural catastrophe occurs. By doing so insurance plays a major role in galvanising investment so that farmers can adopt new technologies with the aim of maximising outputs.
Farmers in Latin America are used to applying techniques that allow them to avoid or reduce the impact of nat cat events (e.g. planting dates, adapted varieties). But risk transfer solutions are under-utilized and that may protect their operations when their existing techniques are not sufficient.
By supporting initiatives such as the one with the Inter-American Development Bank, Swiss Re Corporate Solutions promotes the role that insurance can play in society. The experience of the last eight years in Brazil with Coamo, Latin America's largest cooperative, shows that adequate insurance products can make the difference. Coamo is a cooperative formed by private farmers with no state intervention and today has more that 20,000 members. Being a member has several advantages as farmers have access to technical support, cheap loans and dividends from the cooperative's operation. Droughts such as the ones in 2009 and 2011 allowed farmers that bought our products to pay their loans and invest for the following season, without having to default or even mortgage their land.
It is clear that sustainable and resilient agriculture will need the contribution of the insurance industry in order to cope with extreme events, while maximising production to feed a hungry world.
Category: Food security: Farming