Five reasons why you should be using drones to help your agri business optimize precision farming

Are you using drones in your agri business yet?  If not, here’s five reasons why you should be.

Farming today looks incredibly different to operations twenty years ago.  Gone are the days of guessing weather patterns and crop yields.  Over the years we have seen the modern farmer utilising technology to his/her advantage to provide a more efficient farming process.  Today, drones are playing a major part in modernising farming further and proving to save farmers money by increasing the efficiency of their farming methods, boosting their crop yields, improving their sustainability, reducing their risks, and providing more accurate data for their insurance companies should they ever need to make a claim.

Are you using drones in your agri business yet?  If not, here’s five reasons why you should be:

1. High-resolution images for precision farming

Precision farming is key nowadays and drones are proving to be a very valuable tool in helping farmers to achieve their precision farming goals.  Agri businesses often need to create accurate aerial imagery of a specific area and using drones is an extremely cost-effective, fast, and unquestionable way to achieve this.  A drone’s high-precision GPS enables you to photograph the same area over time (hourly, daily, weekly, monthly) simply by programming the exact co-ordinates for the spot you want to study.  The drone’s software then splices the images together to create a highly accurate, invaluable orthophoto.  This birds-eye view will provide you with insights about subtle changes to your crop quality that you might not be able to see at ground level, as well as conditions that are often not visible to the human eye, such as pest infestations, water stress and fertilizer needs.

2. Precise spraying with drones

Drone usage is not just about taking photos and footage to forewarn farmers of changes to their crops.  Many in the agricultural industry are using drones to spray crops, typically in areas where it would be difficult for machinery to do the job.  Drones are used in this way to complement rather than replace traditional spraying methods whilst improving your sustainability. Their accuracy and efficiency in this capacity is phenomenal thanks to the use of sensors which can identify not just the plants you want to spray, but the specific parts of the to be sprayed. This precision means less money spent on spraying crops that don’t need spraying, and less of an environmental impact on nature living in your fields.

3.  Beyond liquid sprays: application of granular materials

A drone’s use goes beyond the spraying of fertilizers and weedkillers too.  Those in the know are using their spraying drones to reseed grassland, spread granular fertiliser, feed aquatic animals such as fish and shrimp, and many more uses besides.   These jobs can be done remotely and autonomously, saving you more time and money.

4. Exact damage assessments

At a time when extreme weather is causing many problems for the agricultural industry, drones have proven to be a god send because they can be used to accurately assess the damage caused by different natural forces. The advanced sensors built into drones can estimate the extent of the damage caused by wildfires, storms, or other natural incidents, as well as use machine learning to estimate the number of missing or damaged crops.  This means you can correctly assess the economic impact of any climate-related incidents and plan a precise replanting workflow for your crops.  This data is also useful for any insurance claims you may have to make.

5. Environmental health assessment with drones

Drones are also able to help you with your sustainability footprint and reporting.  You are now able to use them to not only precisely monitor how each operation is progressing in your fields, but also to assess the impact of your operations.  Thus, enabling you to draw concrete conclusions and continuously refine your farming methods for a more efficient and sustainable outcome. In many situations, studies like these have revealed things farmers hadn’t previously thought would affect their yields.  For example, drones can be used to test water in irrigation ponds, identifying potentially harmful bacteria or chemicals before watering the crops.  They can also monitor irrigation systems for any potential leaks before it becomes an issue for crops.

Whatever the nature of your farming business, if you’re not already using them, drones are undeniably one of the next steps for you to consider revolutionising your agricultural practices and management.  They are timesaving, money-saving, sustainability-enhancing, and provide invaluable data for both you in your everyday farming practices, and your insurance company if you ever need to make a claim.   Just don’t forget to insure your drones!

Natalia Zaborovska

Zsolt Varga

Practice Leader for Food & Agri Hungary

T +36 20 292 33 73

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Does the Food and Agriculture Industry Really Need Commercial Crime Insurance?

How to calculate your products desirability and evaluate your commercial crime risk.

Imagine, if you will, that you are a poultry business.  Your product is highly desirable: chicken is the most widely bought meat globally.  Have you ever thought about how easy it is to steal poultry?  It is an extremely portable product and due to the nature and volume of sales it is surprisingly straightforward to steal.  A faked invoice or paying-off the warehousemen or guards on the gates of the processing plant will allow a thief to drive right up to the plant and collect their haul.  From here, it is very simple for your thief to sell-on your product.  People want poultry products and whilst cheap poultry may raise a few eyebrows, it is unlikely people will turn down the opportunity to buy cheaper food, particularly in the current economic climate. Selling on a stall at a food market or arranging with a retailer to buy the products is an easy route for your criminal to take, especially as the police are less likely to question the sale of chicken in these environments.

Assessing the desirability of your products

Agribusinesses deal in the most stolen goods worldwide bar cash and, as a result, the sector has seen numerous large losses worldwide – predominantly in basic food stuffs such as milk, meat, bread, and cereals rather than finished products.  Employees working together with outside groups can cause large losses incredibly quickly. So, how do you calculate the desirability of your product to a commercial criminal?  It is a straightforward process of analysing how desirable, portable, and saleable your product is.  If you can answer yes to these three questions when considering your product, then you are at a high risk of being a target for commercial crime.
Desirability – Do people want / need your product?
Portability – Is it easy to steal, especially in large volumes?
Saleability – Is it easy to sell and would it attract attention to the seller selling it?

Which employees are the most likely to commit a crime?

There are several ways businesses could be exposed to crime, both from within the organization because of employee infidelity and from third parties.  With every employee comes a plethora of risks that a business opens itself up to.  From an addict or an employee caught in a compromising situation, to dishonest staff members who want to defraud the company for a share of the profits, there are endless possibilities of how your teams can put your company at risk and the losses incurred are not covered by your standard property damage or business interruption insurance contract. So, what should you look out for?  How do you know who is likely to steal your products, or partner with criminals to rip you off?
Employees with addiction issues are a prime concern for any organisation, and not just because of their decreasing performance levels.  They start out not wanting to commit fraud, but their addiction rapidly turns into a problem for the employee. Typically, they will have a drug, alcohol or gambling issue and will ‘borrow’ money from the company to rectify an immediate problem, always with the intention of paying the money back. However, as their addiction worsens, the problem usually spirals out of control and they start taking more and more to fix their predicament, finally realizing that they cannot repay it; then they run. Whilst not the largest losses these can reach some big figures and €1m is not uncommon, although figures in the hundreds of thousands are more likely. 
Another scenario could be that a member of staff is found in a compromising situation and criminals find out and use this circumstance to blackmail them by forcing the employee to carry out some tasks to either enable them to access your business (electronically or physically), or to simply force the employee to steal directly.  It can be anyone in a company, and losses can be from around €50,000 for a straightforward taking of cash from the safe, to millions of Euros because they granted access to the computer systems.

Types of commercial crime

Fraud by employees in any business sector, including food and agriculture, comes in many guises.  Invoice fraud can very quickly become costly to an organisation.  A member of staff who has control of tendering or contracts might conspire with a supplier to inflate invoices. Normally they split the difference between the ‘real’ price and the stated price. This means that either poor quality services are supplied, or overcharged services with reasonable quality are provided.  If the member of staff is allowed a level of autonomy in this area it can be hard to detect as they will often receive fake quotes to cover the fraud.  
Delivery fraud is another possibility and often works hand-in-hand with either blackmail or general corruption. A gang will find a suitable member of staff who has access to warehouses or other storage facilities and find a way to get them to aid them in their plans. This can be through a simple cut of the profits (Improper Financial Gain) or through blackmail. Either way the staff member will grant them access to the facility through either forged paperwork or being there themselves to open the door. Whole lorry loads of goods can be taken in this way and losses can mount up quickly. It is only when the goods are not paid for that the loss is discovered, which can often be some time down the line. Securing against this can be difficult as the papers to release the goods will be official and unlikely to be queried at the gate.  
More complex frauds are social engineering and fake presidents, which have the same method at their core. They both rely on a level of trust either built up over time or gained by electronic means. 
Social engineering can take the form of regular phone calls building-up a rapport, or targeted emails (finding out the hobbies of a member of staff and then sending them links – Spear Phishing), or even working on an out-of-work friendship which then turns into a request for help. All of these come under the social engineering banner. Once trust is established there will be a request to transfer funds, either for a legitimate looking reason or to help the person conducting the fraud. Once the money is transferred the contact usually ceases immediately.
Similarly fake presidents can fox even the sharpest of employees.  Criminals make a call seemingly from the CEO, CFO, or someone else senior in the business. It typically occurs on a Friday afternoon with a request for an urgent transfer of funds.  The reason given is usually that if the transfer does not go ahead then a deal will fall through to the harm of the company. The call will seem to come from the senior member of staff but will be the criminals who have hacked your phone systems to make it seem like it is the phone number of the person they are impersonating, or used email addresses which are one letter different to the senior employee.  A less sophisticated version of this is hijacking emails and changing bank details at the last minute to the fraudster’s account. 

Minimising losses

As we can see from the above, “non-tangible damage” (financial) losses, caused by infidelity of employees or third-party criminals, can cause quite a big gap in the balance sheet of any Food & Agriculture enterprise.  To minimise your losses, these types of risks should be covered by additional commercial crime insurance policies, and employees should be educated about possible fraudsters and their tactics, so they know what to look out for and how to deal with it if they come face-to-face with a fraudster.

Brian Alexander

Group Practice Leader Financial Institutions

T +43 664 962 39 17

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Parametric insurance – rapeseed: Bessé and GrECo sign an exclusive distribution partnership agreement

Bessé, leading French insurance consulting firm, and GrECo, largest independent risk and insurance management advisor in Eastern Europe, announce the signature of an exclusive partnership agreement to extend the distribution of the parametric solution “Rapeseed Germination.” Based on an innovation developed by Bessé in collaboration with AXA Climate, the joint project between Bessé and GrECo now enables the deployment of a European parametric insurance solution.

A unique innovation for the agro-food industry

Bessé, with its strong focus on innovation, is a pioneer in the field of parametric insurance. In France, the teams have developed a unique insurance product for stakeholders in the oilseeds sector in response to growing climate risks affecting the cultivation of rapeseed: increasingly dry summers deteriorate the growth potential of this crop, from the earliest stages of its development. The solution developed can cover the risk associated with rapeseed germination and is particularly designed for seed companies and grain dealers’ organisations.
Unique on the market, this product is the only solution that can determine the quality of rapeseed germination at field scale, through biomass measurement.

This innovation, developed by Bessé’s experts, is gaining popularity among agro-food operators: almost 80,000 hectares are already covered in France, and it was deployed for the first time in Romania in 2022.

Working together to develop a European parametric insurance solution

Satisfaction in France and confirmation of the solution’s ability to meet the rapeseed crop insurance requirements open new development perspectives in European countries with a strong agricultural sector.
This situation has naturally led Bessé to collaborate with GrECo in CEE. After working together for several months to understand the needs of the stakeholders in these countries and adapt the solution to local particularities, the partners have signed an exclusive distribution agreement, which is already being deployed in the sector.ion.  

Jean-Philippe PAGES
Head of Bessé Large Risks Department

We are delighted to have signed this distribution agreement with GrECo. Like us, they have agro-food experts in their teams as well as solid knowledge of agricultural and parametric insurance. I am proud of this joint project that has led to the development of a European insurance solution that meets the new needs of the agro-food industry. This partnership also confirms the pertinence of Bessé’s strategy and supports our ambition to continue to innovate for our customers.

Shylov Maksym, GrECo Practice Leader Food & Agriculture

Maksym Shylov
GrECo Group Practice Leader in the Food & Agriculture industry

GrECo’s strategy is to specialise in dedicated industries and solutions, such as food and agriculture.  The specific needs and individual risk and insurance situations of our clients drive us to provide the best service as well as tailored solutions. The start of the cooperation with Bessé is a clear step towards implementing this business model. Together, the two companies are forging a common path with the ecological challenges and digitalisation of agriculture, which in turn requires the development and implementation of innovative risk advisory and insurance solutions. We are very pleased about the start of this project

About Bessé
Bessé teams are experts in insurance brokering and consulting for professionals. 500 employees apply their innovation capacity on a daily basis in their specific areas of expertise to support their customers, helping intermediate-sized businesses and large corporations to protect their activities and employees. Over 60 years, with the same values and the same independent spirit, Bessé has gradually emerged as one of France’s leading firms. Bessé’s teams, regularly acknowledged for their quality of service and advice, strive to build long-lasting, trust-based relationships with their clients. No.1 broker in the Risk Managers’ satisfaction survey 2023 (Golder & Partners and OMC). In 2022, Bessé recorded a turnover of €131 M.

Petra Steininger

Head of Group Communications

T +43 664 548 55 58

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When Will Climate Change Affect Insurance Products?

Even if we take extensive action immediately to limit our impact on the environment, climate change cannot be easily stopped. What does this impact mean for the food and agriculture industry and how should insurers prepare for it?

Every year, we see and feel the impact of climate change on ourselves and on our immediate surroundings.  Climate change isn’t new news.  Over the years many scientists have confirmed the impact humans are having on our environment in numerous scientific studies. One such study by the IPCC (Intergovernmental Panel on Climate Change), cites that the average temperature of the earth was 1.09 degrees Celsius higher between 2011-2022, than preindustrial times, between 1850-1900. All forecasts predict, regardless of actions taken, that the earth’s temperature will continue to rise until at least the middle of this century. This means that even if we take extensive action immediately to limit our impact on the environment, climate change cannot be easily stopped. What does this impact mean for the food and agriculture industry and how should insurers prepare for it?

Preparing for climate change

By the end of the 21st century, we will have to, or rather our children and grandchildren will have to, struggle with temperature increases predicted to be, on average, two degrees Celsius higher than the pre-industrial era – that’s twice as high as today!  At the same time, due to heat capacity and inertia, the land will also heat-up until it is approximately one and a half times hotter than the oceans and seas. As the earth’s land mass is predominantly located in the northern hemisphere, this means Europe will acutely feel the rise in temperature.  This is going to cause headaches for the food and agriculture industry and their insurers alike.
In addition to rising temperatures, one must not forget other factors, such as the increasing cost of fuels for energy production and the search for greener, but more expensive, solutions to using these resources.  When these are considered, the desired goal of reducing the impact of industry on the climate is thrown off balance:  Some countries facing rising energy prices are questioning whether it is economically better to continue to overlook the environmental impact of generating energy from traditional, unecological sources to ensure their populations and industries are kept supplied, in lieu of using greener, more expensive solutions to minimise climate change.
Last summer, we saw the effects of climate change, with increasingly hotter summer days and nights, and extreme weather conditions. For holidaymakers, nice weather, and high temperatures are attractive. However, from the perspective of the economy and the impact on society, quite the opposite is true.  Here’s why: High temperatures often exceed the optimal conditions for factories’ production equipment, increasing the risk of failure, leading to downtime and the need to reduce production.  Offices and private homes using air conditioners put a strain on the power grid which results in increased energy consumption. Also, those industries in which it is necessary to maintain a constant temperature (e.g. cold stores, freezers etc.) incur increased operating costs. 
Living things are also not indifferent to high temperatures.  animals migrate searching for better conditions, thermophilic species appear in northern countries, and plants’ vegetation is reduced. 
Lack of rainfall resulting in drought maybe perceived as a mere annoyance for an ordinary citizen faced with restrictions on watering home gardens or washing vehicles.  However, for the food and agriculture industry it can spell disaster. Our rivers suffered greatly last summer, and they have not yet returned to average, safe levels.  This is having a massive knock-on effect on the agricultural industry and our economies as a whole.  Heat is not a critical phenomenon for plants unless it is long-lasting and accompanied by a lack of rainfall.  Unfortunately, last summer’s climatic situation caused prolonged periods of heat, accompanied by periods without rainfall causing agricultural drought, i.e., a state in which the lack of moisture in the soil threatens the vegetation of plants, spelling problems for food production and animal feed.  However, it is not just these obvious effects on the agriculture industry that we need to be aware of here.  Low water levels also affects the energy sector because it restricts the availability of a coolant, causing limitations in energy production.  This in turn impacts agriculture because at high temperatures, the energy industry may activate measures to protect transmission lines leading, for example, to switching off the energy supplied to a plant. This would mean, in the average production plant, that production is temporarily stopped, which would cause financial losses for the business. However, there are some businesses in the food and agriculture industry, especially those connected with livestock, where this scenario could be fatal because a constant energy supply is necessary for ventilation and supplying drinking water to the animals (e.g., poultry farming). If the operation of the plant is directly dependent on energy, and the lack of supply or a change in its parameters causes downtime or damage to the equipment, we are talking about damages that reach thousands of euros.
As if that wasn’t concern enough for the industry, a heatwave is usually accompanied by an equally great wave of fires, which generates large insurance losses regardless of other causes. With very dry soil and litter, it doesn’t take much to start a fire that destroys forests and crops and threatens homes and factories. Very often, such fires cannot be brought under control by local forces, and it is necessary to use the help of other regions or even neighbouring countries.
Higher temperatures also mean a greater risk and frequency of violent weather conditions. Hurricanes, hailstorms, torrential rains, and flash floods are already becoming more and more frequent causes of damage. Their effects on private buildings can often result in irreparable damage or complete destruction.  

Can we ensure against soaring temperatures and the risks they bring?

However, whether risks such as lack of energy due to a heatwave can be insured or not, remains to be seen. Currently, this risk is not commonly insured, additionally, the liability of the energy supplier is limited by the occurrence of force majeure. If we consider a phenomenon that could not be prevented as such, then the heat wave and the resulting lack of water in rivers, limiting production, meets these conditions.  Whilst we are talking about a risk that is not directly insurable, the solution may be index and parametric insurance. If we take specific weather conditions as a parameter, it seems possible to construct a product that meets the needs of customers. In the world, such solutions are becoming more and more common, but the question is, when will we see such solutions in our market?
In a nutshell, as the food and agricultural industry experiences greater challenges in the face of climate change, so too does the insurance industry, and we predict these will only become more challenging as climate change progresses.  The risk profile of individual activities is changing along with climate and environmental changes. In the case of agriculture and crop insurance, we have not had to deal for a long time with the catastrophic extent of damage from the negative effects of overwintering, as in 2012. However, the warming climate, as we have seen, is causing and will continue to cause more summer damage. In the case of industry, the risk of flooding and machine breakdowns is increasing and will continue to do so. Our insurance offer should, and will need to, adapt to these changes to ensure our clients are always fully insured.  Watch this space!

Maksym Shylov

Group Practice Leader
Food & Agriculture

T +48 22 39 33 211

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Food Price Inflation in CEE and SEE Countries – Its Impact on Insurance and the Future

According to the International Monetary Fund food and energy are the main drivers of today’s inflation. That is obvious to each of us as we pay more for both food and energy these days.

This article compares the food price inflation in the countries of Central and Eastern Europe where GrECo Group operates. How did these differences in prices come about and what are the consequences for insurance?  

How food price inflation is measured

The United Nations’ Food and Agriculture Organization uses the Food Price Index (FFPI) to track and monitor price changes in international markets for key basic foodstuffs. The reference period from 2014 to 2016 serves as the FFPI base value, this being 100. For example, if in July 2005 the FFPI in Austria was 76.4, this means that the main basket of food products cost 23.6% less in July 2005 than the average basket in 2014-2016yy. If the FFPI, let’s say, in June 2022 was at 121.1, the food inflation was 21.1% compared to 2014-2016yy.

Food Supply Chain

Different rates of food price inflation in Europe

We analysed the food price indices in CEE/SEE countries, which are split into 3 groups:

  • EU countries using the Euro as an official currency
  • EU countries using their own national currency
  • Non-EU countries

The analysis shows that the increase in food prices in EU countries follows the same course, i.e. the dynamics from 2020 are very high compared to the previous 20 years (2000-2019yy). This proves that the economies of EU countries are interconnected. 
Looking at countries outside the EU, we see that prices have risen in different ways at different times. For example, an interesting fact about Ukraine is the sharp increase in prices in 2013-2014, which can be attributed to the destabilisation of the economic situation during the Maidan Revolution, followed by the first Russian occupation and the subsequent large devaluation of the local currency.
A more interesting trend can be seen if we take a closer look at the period 2020-2022, primarily related to COVID and Russia’s invasion of Ukraine.

  • Among the six Euro area countries we analysed, Austria showed the lowest FFPI increase and Lithuania the highest.
  • Among the five EU countries that use national currencies, the highest inflation was recorded in Hungary, and the lowest in the Czech Republic.
  • Among the four non-EU countries, Ukraine suffered a much higher FFPI than in the period 2014-2016. Serbia, however, is the most stable in this respect.

A look at increasing food prices during 2020-2022

The table below clearly illustrates the differences between countries. It allows for a better comparison of FFPI values at different points in time during recent periods. For example, the column 2022vs2020 shows the percentage increase in food prices on July 1, 2022 as compared to July 1, 2020.

table food prices

The table also shows that inflation in the period 2022-2022yy was twice as high as in the period 2020-2015yy in almost every country. Prices started to increase drastically as from the third and fourth quarter of 2021. We therefore believe that the root cause was the post-COVID food and energy supply chain crisis.

Why is food price inflation so high in 2020-2022?

One of the root causes of any inflation is the scarcity of goods, eithertheir total lack or their availability in only insufficient quantities. This happened in the post-COVID recovery phase, when deferred demand for energy resources collided with supply chain constraints. At the same time, in 2021, we witnessed a sharp increase in the prices of cereal and oilseed raw materials. We also saw the first forecasts of increasing food prices. Soon thereafter, Russia’s invasion of Ukraine led to a new problem in the food supply chain, a problem that continues to this day.
Another cause of inflation is excess demand, be it due to the government printing extra money, the acceleration of the money multiplier, new demand created by GDP growth or due to the inflow of new foreign capital. For example, according to Forbes the consistent monetary stimulus on a massive scale, unprecedented since World War II, turned the flywheel even further in 2020-2022.
On top of that, the negative expectations of enterprises and consumers add even more fuel to the fire. Today, nobody is willing to take a risk by selling goods without hedging against the risk of higher production costs in the future. Already, manufacturers are increasing their prices in order to transfer the risk to their consumers. There is also the theory, that big corporations and monopolists (e.g. in the energy segment or food retail) merely squeeze out more profit by driving prices up. Therefore, it will be interesting to see what the final 2022 balance sheets and ESG reports will look like in 2023.

Impact of the inflation on the insurance markets

In our opinion, inflation impacts negatively on insurance consumption and insurance premiums. On the positive side, greater financial uncertainty and changes in the spending behaviour (increased share of spending on inflexible goods and utilities) make households and enterprises rethink their insurance spending.
To further curb price increases, central banks significantly raised base rates. Together with inflation expectations and the calculation of an additional risk premium for uncertainty, such actions lead to a significant increase in the cost of capital. This means that investors in the insurance industry are increasingly making outrageous demands.
Thus, we have already witnessed a lack of capacity following the first wave of investor capital outflow from international insurance markets. As a result, insurers are not only starting to optimise their portfolios, they are also becoming increasingly risk averse. Some of the conventional property risks are very difficult to renew and additional limits in e.g. the meat industry, in agricultural insurance, and in other sectors can hardly be obtained. Markets are thus hardening again.

What can we expect in the near future and what will save us from the abyss?

Food and energy supply chain constraints pushed up prices post-COVID. Aggressive government monetary policies, negative expectations and further supply chain disruptions caused by Russia’s invasion of Ukraine exacerbated the situation. This has affected the countries of the CEE/SEE region in different ways, yet what they have in common is that prices in 2021-2022 have soared at an unprecedented rate. The insurance market, in turn, is entering a phase of portfolio optimisation due to the growing lack of investor capital.
So, what does the future have in store for us?
A similar scale of inflation (as shown in the graph below) took place in the 1970s when price increases were associated with oil shocks in 1973 and in 1979-80. That said, prior to these shocks, monetary policy was focused on keeping interest rates low to maintain employment levels and pour more money into an economy that resembles ours today. Further policy tightening resulted in a deep economic crisis in the early 1980s.

food price index

However, there are two important differences between the current situation and the 1970s:

  • The magnitude of commodity price jumps today is smaller than in the 1970s.
  • A paradigm shift in monetary policy frameworks took place since the 1970s, i.e. central banks in advanced economies now have clear mandates for price stability, which is expressed as an explicit inflation target.

According to The Centre for Economic Policy Research (CEPR) “beyond the near term, inflation is expected to decline, but the experience of the 1970s suggests some material risks to this inflation outlook”. CEPR considers risks to be material if the following events do not occur: ”1. global production lines and logistics adjust, 2. inflation expectations are likely to remain well anchored over the medium term, 3. the structural forces that depressed inflation before the pandemic persist”.
In addition, we believe that increasing economic activity towards the reconstruction of Ukraine and new investments in technologies leading to the decarbonisation of economies will additionally inject economic growth, which will in turn, result in a stabilisation of prices.
Sources consulted: )

Maksym Shylov

Group Practice Leader
Food & Agriculture

T +48 22 39 33 211

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How do Food & Agriculture companies insure their plants abroad?

International Insurance in Agriculture

Multiple positive benefits come with international insurance programs.

International or Local Insurance?

When an enterprise has a wide range of operations in more than one country, a convenient form of insurance ensures the entire enterprise, together with foreign entities, in an international program.

This is a fitting solution for companies with subsidiaries, commercial agencies, warehouses or production plants abroad.

Advantages of the international programme?

Multiple positive benefits come with international insurance programs.

They allow for controlling the scope of coverage and the cost of insurance from the level of the parent company by one person responsible for the risk or insurance. It is easy to obtain a homogenous and possibly the broadest scope of insurance coverage for the entire company without leaving any gaps. International programs usually mean higher limits and broader protection than those locally available for individual companies or plants.

Thanks to their wide scope and uniform structure, international programs come with a lower premium. This is not always guaranteed, but in most cases, the premium is lower than one negotiated with many different offers for individual companies/subsidiaries.

The conclusion of an international program allows a higher level of deductible. A group of companies, acting as a whole, can retain a higher share than a single entity. The higher risk levels remaining with the client, the smaller share of risk transferred to the insurer and the lower the final premium.

In the international program, people responsible for risk or insurance have access to all claims data, which allows for better analysis of causes and minimization of unacceptable risks. Finally, control over claims also means more effective claims handling by insurers.

However, there are several elements where international programs will not always be sufficient, and a better solution would be insurance taken on the local market. For example, there are risks exclusive to one company which do not exist at a group level (e.g. crop insurance). Also, we should not forget insurance that requires local service (e.g. health or accident insurance for employees).

As seen above, from the parent company’s point of view, international programmes have many advantages but do not always cover 100% of the risks associated with the activities of local companies. Therefore, the best solution is to combine both insurances. Use an international programme for those risks and assets managed at the group level and attach local policies (to the extent that the programme does not offer full coverage).

Based on this assumption, the best solution for the client will be to use the professional assistance of an experienced broker in both the development of international programmes and with a good understanding of the local market in the many countries where he actively works. GrECo is such a choice.

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Zsolt Varga

Practice Leader
Food & Agriculture

T +36 20 292 33 73

35 ways to improve crop insurance

A farmer who already have crop insurance and for those thinking of getting one

Some advice for farmers who already have crop insurance and for those thinking of getting one.

Adverse weather conditions are common companions in our lives.  It is difficult to predict weather conditions, even if there is a long experience from the past. Global climate change and the probability that bad things may always happen lead us to thinking about how to insure this uncertainty.
The following text is our message to the farmers who already have crop insurance and those who are envisaging to buy an appropriate product.

First of all, why do I need crop insurance? 

In the practice of farming risk management, there are several tools for dealing with weather risks, in particular:

  • use of weather forecasts;
  • application of irrigation systems;
  • technologies of minimum tillage;
  • use of more drought-resistant varieties / hybrids;
  • diversification of crops, varieties / hybrids, growing regions, sowing dates;
  • external borrowing, government support, aid from friends after a damage has occurred.

Is this enough to be sure that I, as a farmer, will have guaranteed yield and financial results?

Of course, not.
The best irrigation technologies and moisture saving practices will help to prevent or mitigate the loss, but, unfortunately, not in full. It is like in aviation, where people care for the utmost safety of flights, but there are still parachutes and oxygen masks on board.
Some farmers rely on the strategy to compensate losses of bad years by the yield surplus of good years. However, such practice is getting more and more problematic, as we are facing more often than before consecutive bad years (e.g. 2018 and 2019 in Poland and Lithuania). Sometimes there are even three bad years in a row. Imagine!
Moreover, such a self-retention strategy for losses requires actually more money than buying insurance.  You, as a farmer, can say “I will no longer buy a new Range Rover right now, as I have to freeze my funds to cover my loss caused by the next drought”.
In some CEE countries, farmers do not have a long-term risk management strategy and live just as they are, despite facing a lot of risky situations. If you really think to sell your farming business at any time, the value of your company will be much higher, if there is a stable annual cashflow that is supported by an effective crop insurance policy.

And let’s not forget about your health! A farmer sleeps better when he has an appropriate insurance policy, he feels much safer, especially if his cover is provided by a recognized insurance company, who cares for long-term relationship.

Find the right insurance company

You can trust your partner after you have made a thorough check. It is true that there are sometimes complaints about insurance products and companies. But on the one hand people tend to speaking 10 times more about bad experience than about positive events. On the other hand, mistrust can be a result of misunderstanding. First of all, we recommend to our farming clients to understand who their insurers really are.
Some points for you to consider and to ask your insurance agent:

  • Who is the shareholder of the insurance company?
  • How long do they exist?
  • Who reinsures the risks of damage to your crops?
  • How much will the insurer really pay from his own account in case of a catastrophic weather event, i.e.  when the other farmers will also suffer loss?        
  • What was the ratio between collected insurance premiums and payments in the past?
  • How many people with agronomic education or practical experience in agronomy work in their staff?          
  • How many crop insurance contracts do they have in their portfolio and how many insurance claims were made?        
  • Are there any substantial loss payments per single claims?  
  • Are there any farmers who received significant payments and can recommend this insurance company to you?

Realize the gaps in your coverage

The second thing suggested by us is that you understand your insurance cover.
In CEE/SEE markets it is difficult to find the ideal crop insurance.  Due to the nature of agriculture itself, detecting the ideal insurance solution is generally not easy. But there are some insurance markets that reach some level of excellence thanks to their long-time tradition of public and private partnership in agriculture. However, they do not work in most cases for Central and Eastern Europe … We hear very often from European insurers about their “low risk appetite”!
Our checklist to investigate your coverage is as follows:

  • Is the sum insured high enough to cover potential loss? 
  • How is the yield to be insured defined?
  • When does the coverage incept and end?
  • How fast will my crops be admitted for insurance?
  • Are there any additional indemnity limits?
  • How is the yield loss estimated?
  • What is the methodology of calculating the predicted harvested yield?
  • Are all my production perils covered? 
  • How high is the deductible?
  • How is the deductible applied (per field, per loss, per crop, per farm)?
  • Are there any additional franchises or deductibles?
  • Are all my crops covered?

If you are just starting with crop insurance, we also advise to make historical simulations of pay-outs – how much indemnity would you have received if you had had this crop insurance contract in the past, i.e. when your loss had really occurred?
However, please be aware that in a short-time perspective you always pay for insurance more than you may get back in loss payments. But think of the fact that the insurance premium has to contain reserves for the probability of catastrophes and a possible deviation from short-term (10-15 years) statistics.  Some new losses might occur on your farm, that you did not experience in your past farming history. Moreover, the climate change trend is not quite optimistic and, as a rule, does not lead to expectations of better yields…
If something is not possible to insure (lower deductible, higher limit, a specific peril, early risk period etc.), keep in mind that some gaps in the coverage can be eliminated by alternative risk transfer solutions, like parametric insurance, weather derivatives and captives.

Mind the insurance wording

You are definitely right that insurance wordings are boring and difficult to read, but “the devil is in the details”. When it comes to the big loss, all such details will be relevant.
Please, be careful with the following clauses of insurance wording:

  • Is your insurance contract really complete with all wordings? It may happen that some insurance terms & conditions are not provided to you for your consideration. They might contain additional exclusions from insurance coverage, as well as other clauses of significance, like special warranties.
  • There should be no contradiction between single wordings. Otherwise you need an additional clause that clarifies which stipulation is the right one in a given situation.
  • Is there a right of the insurer to terminate the contract unilaterally during the contract period?
  • What are the definitions of the insured risks?
  • How is the stipulation in respect of change in risk during the policy period?
  • Is the methodology of loss estimation fully documented and clear? 
  • Are all documents and additions related to the insurance contract (incl. crop survey protocols) signed by the authorized people?
  • Is the insurance company obliged to leave an original copy of any crop/loss survey report at once on the farm?
  • Is there any deadline stipulated for crop surveys after the loss has occurred?
  • Is the farmer allowed to leave some samples for an alternative expert opinion?
  • How does the “gross negligence clause” look like?
  • What are the deadlines for the insurer’s right to postpone their decision on claims payment?

Find the right partner to help

And last but not least: Never be alone! Find the third party who can help you in case of any problem with insurance products or insurance companies. You can ask for the help of the professional broker, as he is highly skilled and experienced in respect of insurance wordings, he thoroughly knows the insurance markets and he has developed good working relationships with crop insurance risk carriers.

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Adriana Cavescuone

Adriana Cavescuone

Account Manager
Food & Agriculture

T+40 21 302 24 09

Product Contamination Insurance – Risks and Liabilities

Food and Production Contamination Insurance

Product Contamination Insurance offers a much broader range of cover than classic recall insurance and provides cover for a catalogue of costs.

Companies operating in the food industry can face many problems leading to significant losses due to incidents of product contamination. The topic is important, particularly for those businesses that operate outside their local market.

Exporters need additional organisational and financial support when reacting quickly to a real or potential threat to property or the life or health of consumers in various parts of the world caused by their product.
According to several studies, as many as 58% of companies have been affected by events involving food recalls.

The risk of a product recall is always present

The product recall insurance offer is designed for any client who places food on the commercial market, including both unprocessed products (e.g. meat or seafood) and highly processed finished products (e.g. cold cuts pasta, confectionery, beverages).

Due to the nature of the products sold and their storage requirements, great care should be taken by those who distribute, for example, fruit and vegetables. These products are sensitive to storage conditions. Improper storage of eggs and dairy products can even lead to health problems and illnesses for consumers. It is also crucial for manufacturers who use nuts, grains or spices in their plants to be mindful of the risks associated with possible contamination of their product by these allergenic agents.

Product withdrawal from the market can happen for multiple reasons. It could be microbiological contamination, i.e. contamination of the product with bacteria; it could also be physical or chemical contamination. Mislabeling, use of unapproved ingredients, or even failure to observe the proportions between individual ingredients may cause the claim and the need to recall the product. These circumstances lead to the product being considered non-compliant or even dangerous for consumers and a recall for the entire batches of finished products.

One example is a German company with a turnover of EUR 100 million that had to incur additional recall costs in the US and UK after listeria bacteria was found in its meat products. In the end, the loss amounted to EUR 90 million.

A bottle manufacturer from Poland received a $10 million claim related to having to recall several million bottles of beer. Only three bottles had cracks, but all of the bottles placed on the market were recalled for customer safety reasons. Insurance covered the loss.

What are the reasons for liability?

Liability reasons can be multiple. Accidental contamination means ingestion of the insured product has led or may lead to bodily harm. Examples of contamination include listeria, E. coli, salmonella or foreign bodies (e.g. plastic/metal in the product).

Malicious product contamination is the actual or likely deliberate alteration/contamination of a product. Often it is done by disgruntled employees who have access to the facility or product.

Product-related extortion happens when a person or group threatens to extort money by deliberately tampering with a product, e.g. contaminating it. Government withdrawal represents a forced or ordered withdrawal by a government or regulatory body. It often includes suspension of operations and applies whether or not contamination is present. Finally, adverse publicity is any reduction in sales caused by alleged, but not actual, contamination.

What can you expect with Product Contamination Insurance?

Product Contamination Insurance offers a much broader range of cover than classic recall insurance and provides cover for a catalogue of costs:

  • Recall replacement costs (including product value), damage-owned and third party costs and expenses.
  • Interruption of the insured’s business and loss of profit – inter alia if the facility is closed due to contamination and needs professional services to survey and disinfect the facility. Even one day of downtime generates a loss, and prolonging it increases costs.
  • Increased labour costs – the cost of staff working overtime or employing extra people to clean up the contamination/recall or disinfect the plant.
  • Reputation restoration costs refer to the cost of bringing the brand back to its pre-recall condition. Includes sales and marketing costs, like giving a discount on your next product purchase or promotion where if you buy one product and get another one for free.
  • Product recall liability damages are any damages that the insured is legally obliged to pay to its customer in the event of contamination. Damages may include loss of client profits, rehabilitation expenses or reimbursement of purchase costs.
  • Consultant costs refer to the expenses of expert consultants who will guide the insured through the crisis. A pre-incident fund is also available in the policies, and it may include reviewing crisis management plans and providing food safety training.

This article is a part of our Foodprint publication focusing on issues and risks facing the Food & Agriculture industry. Read the publication and learn more about insurance solutions and the growing importance of risk management and alternative solutions like parametric insurance.

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Stephan Eberlein

Group Practice Leader Financial Lines

T +43 664 962 40 60

Creating confidence in livestock production and supply-chain

The livestock supply-chain is one of the three major concerns and areas of activity of the Food & Agriculture Organization of the United Nations (FAO), aimed at increasing resilience in respect of threats and crises that affect agriculture, food and nutrition.

Epizootics are the global concern

So called epizootics – animal diseases – are of more and more concern not only for the farming society, but also for whole countries and regions, as they even can cause problems to human health. Therefore, this topic has become part of the general food protection policy.

The need to fight against animal diseases at global level led to the creation of the Office International des Epizooties through the international Agreement signed on January 25th, 1924. In May 2003, the Office became the World Organization for Animal Health, but kept its historical acronym OIE.

One of the main missions of the OIE is to collect information from its member countries on the presence and distribution of animal diseases and the methods used to control them, the purpose being to avoid the spread of epizootic diseases at international level.

At the moment 16 diseases are monitored monthly and contained in the o called OIE List A, namely:

  • Foot and mouth disease
  • Swine vesicular disease
  • Peste des petits ruminants
  • Lumpy skin disease
  • Bluetongue
  • African horse sickness
  • Classical swine fever
  • Newcastle disease
  • Vesicular stomatitis
  • Rinderpest
  • Contagious bovine pleuropneumonia
  • Rift Valley fever
  • Sheep pox and goat pox
  • African swine fever (ASF)
  • Highly pathogenic avian influenza

These are classified as “Transmissible diseases that have the potential for very serious and rapid spread, irrespective of national borders, that are of serious socio-economic or public health consequence and that are of major importance in the international trade of animals and animal products.”

Development of African Swine Fever and avian influenza during last decade

The best-known epidemics, that are treated in plenty of mass media, are African Swine Fever and Avian Influenza (“Bird Flue”). For example, a massive outbreak in China wiped out at least 40% of China’s pigs in 2019. In some countries of Central and Eastern Europe ASF has been present since 2014 and is not over yet, as the human factor and the presence of infected wild boars spread this disease significantly.

African swine fever (ASF) is a devastating infectious disease of pigs, usually deadly. No vaccine exists to combat this virus. It does not affect humans nor does it affect other animal species other than pigs and wild boars. It can be transmitted either via direct animal contact or via dissemination of contaminated food (e.g. sausages or uncooked meat).

The ASF virus spread to Europe for the first time in 2007 through the Trans Caucasus Countries and the Russian Federation. The next massive outbreak occurred in 2014 affecting Russia, Ukraine and Baltic countries and is lasting until now and moving to the West of Europe.

Dynamics of number of ASF on farms in some countries of Europe (data from the EU Animal Disease Notification System).

20142015201620172018201920202021(till Feb.21)

In addition to the cases mentioned above, ASF was found in wild boars in Germany, Belgium, Hungary and Czechia.

Avian Influenza (AI) or “Bird Flu” is a highly contagious viral infection which can affect all species of birds and can manifest itself in different ways depending mainly on the ability of the virus to cause disease (pathogenicity) and on the species affected.

Influenza infections in birds are divided into two groups based on their pathogenicity:

  • Highly Pathogenic Avian Influenza (HPAI): spreads rapidly causing serious disease with high mortality (up to 100% within 48 hours) in most poultry species (except domestic waterfowl)
  • Low Pathogenic Avian Influenza (LPAI): causing generally a mild disease, may easily go undetected

While the risk from Asian H5N1 is low for most people, sporadic human infections with Asian H5N1 virus have occurred in some Asian countries. Most human infections with Asian H5N1 viruses in other countries have occurred after prolonged and close contact with infected sick or dead birds.

We can witness a new wave of Avian Influenza in Europe, which started at the end of December 2019 in the Netherlands and Poland and spread for the next 12-15 months over whole Europe.

Dynamics of spread can be seen on the pictures below (data from EU Animal Disease Notification System):

Risks in supply-chain and how they are managed

Usually, if an epizootic disease occurs in a part of the farm’s premises, all animals of the farm will die or will be slaughtered upon order by the state authorities. It leads to the total loss of animals on a farm. Moreover, besides material damage related to animals, the farm suffers losses caused by the interruption of activities, as it takes time to slaughter, transport and utilize animals, disinfect premises and keep them closed for enforced quarantine time (3-12 months), then implement an additional 1-3 month testing period and fill in the full production cycle. Therefore, business interruption loss of gross profit can be a much more substantial loss than just the loss of culled livestock.

Besides the risk of having the virus inside the farm, there is also the risk of government restrictions for animal transportation, if the farm is trapped into a risk control or surveillance zone, which can reach a radius of up to 20 km from the epicenter of the outbreak.

In addition, according to EU legislation, there is special zoning of infected areas, where additional limitations are imposed and its derogation requires some compliance with veterinary rules, if the farm wants to proceed transporting live pigs to non-affected areas of the same country or of another EU member state. Such necessary measures can lead to additional increased cost of working for a long period of time.

It can be said that in respect of epizootic scenarios slaughterhouses and meat processors are not the less vulnerable. On the one hand they are dependent on stable supply of live pigs or fresh meat, and on the other hand export markets can be unexpectedly closed as long as epizootics occur in the country where they are located. The latest story of this sort happened in Germany, when the Chinese government immediately closed the border for producers of German pork after the first infected wild boar was found on German territory. In terms of disruption of the supply-chain, the main sources of risk of a slaughterhouse and a meat processor are as follows:

  • Virus found on premises of a slaughterhouse or a meat processor.
  • Virus found on premises of a farming supplier.
  • A large number of farming suppliers are trapped in control or surveillance zones, which leads to constraints in the movements of finishers for slaughter and further processing.
  • The slaughterhouse or meat processor is trapped in control or surveillance zones.

Moreover, events associated with epizootic outbreaks can make farmers or slaughterhouses liable to compensate claims, brought against them as consequence of the 3rd party’s product recall and product contamination costs and direct damage to the contingents.

In order to prevent the spread of epizootic diseases and to compensate for the financial consequences of events occurred, governments deploy legislation in relation to:

  • basics of strict bio-security measures on farms;
  • measures taken by authorities regarding the destruction of affected or suspected animals and the prevention of further spread of the disease;
  • long-term zoning in order to regulate movement of livestock and meat products;
  • financial compensation for the value of killed and culled animals.

On a microlevel, the farmers and meat processors implement special bio-security audits, put additional investments into the improvement of bio-protection and prevention measures against the occurrence of diseases on farm premises, develop business continuity plans in order to be ready to react and modify their business model in the event of a disease. Based on the GrECo Food&Agri practice, our cooperation with farmers and breeders’ associations in several countries, we count about 100 factors of bio-security that can be analyzed and afterwards implemented in order to reduce this risk.

Insurance solutions to mitigate financial losses

The ultimate parachute each livestock breeder and meat processor should definitely possess is a livestock insurance policy. We can witness that even the modern farms, that invested a lot in biosecurity, have suffered the emergence of African swine fever or bird flu on their grounds.

When designing a livestock insurance program, one should take into account the following:

  • we need to avoid an overlap with government compensation of the value of the killed and culled livestock, which is usually financed by authorities (e.g. in EU);
  • on the other hand, in many countries the government usually does not fully compensate 100% of animal value;
  • for vertically integrated meat producers, it is recommended to consider business interruption insurance coverage rather than pure material damage;
  • meat processors can be offered a livestock contingency BI program, which covers loss of gross profit as a result of disruption of livestock supply.

GrECo works with up to 20 international markets who can offer standard or bespoke livestock insurance solutions. Unfortunately, livestock material damage coverage is getting harder and harder to be placed, as insurers’ appetites in respect of CEE/SEE regions are quite low. Insurance and reinsurance companies are aware of the ongoing epizootic situation in this area, especially regarding ASF and HPAI. However, some innovative solutions and schemes have been developed by our Food&Agri practice to partially overcome such challenges. One should also not forget that any insurance of exposed risks should go alongside with risk management services consisting of bio-security audits and business continuity plans, that can be provided by our special GrECo Risk engineering department.

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