REINSURANCE OFÂ AGRICULTURAL BUSINESS LINE Financial Strength Rating
A M
BEST A- Excellent
General information on Polish Re Polish Re based in Warsaw is one of the leading regional reinsurers present in all markets of Central and Eastern Europe. The Company operates in over 30 countries and cooperates with nearly 200 clients. In 2017, the Company’s gross written premium amounted to USD 64.5 million. At year-end, the Company had shareholders’ equity of USD 74.8 million.
Polish Re was established in September 1996. The Company is rated at the level of ’A-’ by AM Best with a stable outlook. In January 2009, Polish Re became a member of Fairfax Financial Holdings Limited, headquartered in Toronto. Fairfax Group operates in the non-life insurance and reinsurance markets in many countries worldwide. In 2017, the Group reached gross written premium at the level of USD 12.2 billion and the shareholders’ equity of USD 18.4 billion.
30 countries nearly 200 clients over
gross written premium amounted to USD million
64.5 rated A- by AM Best
Agricultural business line of Polish Re In 2010, the Company commenced writing the agricultural business. Since then, Polish Re has gained a position of the reliable business partner and has been actively expanding this line of business, sustainably enlarging the portfolio of crop, livestock and fish farms insurance. Now, Polish Re operates in 18 countries in Europe, Africa and Asia having almost 40 clients.
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What distinguishes Polish Re from other companies is the support offered to our clients to start agricultural business from the beginning.
Types of agricultural insurance business supported by Polish Re Polish Re supports insurance portfolios of clients (insurance companies) which consist of all typical crops cultivated in particular countries, as well as livestock typically kept and bred.
Most crop portfolios of our cedents consist of cereals, corn, rapeseed, vegetables, fruits, while livestock covers milk, fattening cows and poultry farms. Fish farms specialize in salmon and tuna are also of our interest.
Polish Re expertise areas Polish Re assists in developing the following areas aiming at composing an agricultural insurance offer for its clients:
A draft of guideline for loss adjustment in crop business
Drafts of policy wordings for crop (field crops and glass houses) and livestock insurance
A draft of guidelines recommended for the risk assessment covering key elements such as:
which is much more extensive and contains the methodology of accurate loss adjustment in case of particular, most common types of crops, namely: ▪▪ how to assess a general condition of plants, ▪▪ how to calculate the expected yield of crop being in a field, ▪▪ how to find symptoms of materialization of insured perils, ▪▪ how to find symptoms of materialization of perils which were not insured and calculate their effect on the final yield, ▪▪ how to calculate a loss (yield decrease) and the amount of compensation.
With the assistance of our clients, considering trends in a particular country and a region and building upon Polish Re’s experience, we are able to develop insurance products which meet farmers’ expectations and allow the insurer to generate profit. Recommended solutions comprise of standard and over standard scope and subject of insurance, also typical exclusions, sub-limits, deductibles etc. in order to avoid non-insurable problems.
▪▪ the portfolio management (based on analyses and expectations), ▪▪ risk assessment crucial elements (typical for given species), ▪▪ what to consider in a specific field of given crops which is to be insured, in other words how to assess plants’ condition and environmental factors.
A draft of tariff rates based on local statistics if available
A guideline for loss adjustment in livestock business
which comprises of general rules of claims handling.
If not (clients start from a greenfield) – Polish Re together with a client develop tariffs based on statistics from neighbor countries or countries where the climate is similar.
Analyses, which Polish Re can develop for clients with clients’ assistance Such analyses are essential before starting crop & livestock insurance business. Crop and livestock insurance business requires specific statistics, which consider various aspects of agriculture, intensity of perils occurrence, farmers’ behavior, etc.:
a general crop and livestock production (tones, number of units, areas, yields, prices, etc.)
characteristics of potential clients (farms)
a demand for such insurance coverage (perils to be insured)
graduation and characteristics of particular perils with recommended solutions (sub-limits, deductibles and franchises to be adopted, perils and risks needed in the portfolio and those which are considered as non-insurable ones etc.).
The above analyses are necessary to develop a proper insurance offer. Moreover, the statistics should reflect:
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the potential of the market per region, based on the production and its value, the demand for insurance coverage, perils which are the least and the most dangerous, farmers’ consciousness, capabilities of the insurance industry
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the expected frequency of losses per type of peril, per region, per type of crop
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tariff rates which are to be offered per type of crop and livestock
costs of loss adjustment
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costs of risk assessment
costs of reinsurance
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the expected profit margin
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Seminars and training courses Almost each year, Polish Re invites representatives of cedents to take part in seminars or training courses dedicated to various aspects of agricultural insurance. We host both beginners and experienced participants. During such events, our guests are familiarized with nu-
Classes are delivered by: ▪▪ Polish Re high qualified specialists, ▪▪ experienced insurance and reinsurance underwriters from various companies and various countries, ▪▪ loss adjusters with a very long experience, ▪▪ technical support suppliers for crop business, ▪▪ scientists who represent climatology, agriculture, insurance, economics.
merous aspects of crop & livestock insurance business. Polish Re representatives as well as experts with whom Polish Re cooperates present a series of lectures which concern various aspects of managing insurance for agriculture. After the theoretical part, participants are invited to fields or livestock farms, to practically examine issues which were presented theoretically.
Polish Re reinsurance offer In general Polish Re offers mainly two types of reinsurance support: ▪▪ based on Quota Share principles, ▪▪ based on Stop Loss principles, ▪▪ XL support, which is offered rarely. Predominantly crop & livestock portfolios are supported by sole treaties, but sometimes constitute a part of bouquet cover together with property business line.
Quota share (QS) – basic concepts
Stop Loss (SL) – basic concepts
A reinsurer and a cedent equally participate in the premium and damages in proportions specified in a reinsurance contract.
This type of treaty protects all losses covered by a contract up to an agreed limit, in excess of an agreed monetary amount known as ’priority’ (sometimes also called ‘deductible’).
Retention: a part of the portfolio remains on the share of the cedent. Cession: a part of the portfolio is ceded to reinsurers. Share of the cession: a part of the portfolio is accepted by a particular reinsurer. Reinsurance commission: in return for making a cession to a QS cover, a cedent receives reinsurance commission. This commission should be adequate to costs regularly incurred as a result of managing the portfolio (i.e. agents’ commission, costs of loss adjustment etc.). Usually, Polish Re applies a sliding scale commission, which allows our clients to get more commission when the results of the original business are good.
The coverage and priority are expressed as loss ratios – LR (a percentage of losses divided by a premium income). If a part of the portfolio is ceded based on a QS, then SL protects a retention, in other case it protects the whole portfolio. Sometimes a cedent decides to protect the whole portfolio only against unpredictable and severe events (mainly materialization of systemic perils) from a certain level of loss ratio (usually 110% or 120% of LR).
Renewal info – historical results and assumptions for the season to come Before concluding or continuing a reinsurance cover, Polish Re requests clients for information regarding the original business. The subject and the scope of the original business information covers:
types of crops and a scope of perils
exclusions, definitions of perils
types of livestock and a scope of perils
a summary of loss adjustment guidelines
franchises and deductibles
a summary of policy wordings
changes in the legal environment, ongoing changes in the portfolio as regards the above elements (covers also the expected changes in law regulations)
Premium and loss statistics (the longer period the better, at least 5 consecutive years) should reflect the past and coming business. Premium statistics should contain:
a premium amount per type of crop and a region
a premium amount per type of livestock
an estimated premium income (EPI) in a coming season split by as in the above points
Loss statistics (more important than the premium ones) should contain (the more granular the better) the number and the amount of losses as well as a loss frequency per:
type of crop and type of livestock per region
perils which materialized, and area affected in case of crops per region
a premium amount per peril or MPCI (multiperil crop insurance – i.e. a package of perils), regionally
What distinguishes Polish Re from other companies is the support offered to our clients to start agricultural business from the beginning. For more information please contact:
KONRAD ROJEWSKI Product Manager – Agriculture e-mail: konrad.rojewski@polishre.com, www.polishre.com