AgriInsurance in Canada

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1 AgriInsurance in Canada Brad Klak, President and Managing Director Merle Jacobson, COO, Operations Division Agriculture Financial Services Corporation Alberta, Canada

2 Agriculture in Canada Total Cash Receipts Total Farm Cash Receipts 2011 $50 billion

3 Agriculture in Canada Major Sectors Total Land 90 million acres - crop 67 million acres - forage Total Livestock 12.2 million cattle 12.9 million hogs Fruits Cattle Hogs Vegetables Vegetables Cattle Hogs Cattle Hogs Fruits Vegetables Cattle Hogs Cattle Hogs Fruits Vegetables Vegetables Fruits Vegetables

4 Agriculture in Canada Major Cause of Loss Excess Rain Frost Hail Disease Hail Frost Frost Hail Frost Frost Hail Disease Frost Disease

5 Agriculture Insurance in Canada Multi-Peril Crop Insurance (AgriInsurance) Producer and government funded Delivered by provincial government agencies and crown corporations Hail Insurance Delivered by Private insurance companies Some provincial government crown corporations Some provincial Crown Corporations Provide: - Agriculture and business loans - Government agriculture grants Price and Margin Insurance Producer funded Some are Government backed Delivered by Private insurance companies Some provincial government crown corporations

6 Producer, Federal and Provincial Governments play a role in AgriInsurance Federal government Develops national standards for Premium Rates, Projected Yields, Self-Sustainability, Insured Values, Level of Coverage and Insurable Benefits Approves provincial cost-shared program proposals Pays 36 percent of premiums and 60 percent of administration costs Provides reinsurance to provincial governments (deficit financing mechanism) Provincial governments through their insurance agencies Flexibility in program design, development; delivery and promotion Pays 24 percent of premium and 40 percent of administrative costs Provide an appeal process for producers Secure deficit financing Agriculture producer Select coverage and options before seeding Pays 40 percent of premium Timely filing of seeded acres and claims

7 Production Guarantee = AgriInsurance - How Yield-Based Insurance Works Projected Yield x Coverage Level x Insured Acres Production Shortfall = Production Guarantee crop s actual production Payment amount = Production Shortfall x Insured Price Insured Price based on a projected or historical average of prices, costs of production or replacement values

8 Features Other Design Considerations Unseeded acreage, reseeding, plant (asset) loss, and quality loss Elected Options Spot loss hail Price decline Harvest price insured value Alternate Design Area Based Rainfall, Satellite Imagery, Heat, Proxy Crops Basket of crop losses Unseeded acreage, reseeding and plant (asset) loss

9 Participation in crop insurance is strong and has grown over time 100 Crop Insurance Participation and Seeded Acres, % Crop Insurance Premium Cost-share (Fed & Prov) and Participation Acres (Millions) Seeded Acres 70% 60% 50% 40% 30% 20% Insured Acres 10% 0% Total Government Premium Subsidy Ratio Insured Acres, % Total

10 Premium Income growing with more acres insured and higher crop prices Comparison of Production Insurance Premiums and Indemnities 1970 to 2012

11 Continued improved: Future Directions new technologies to reduce delivery costs and improve customer service Premium and indemnity forecasting Potential new and enhanced insurance plans for: livestock, forage, pasture and difficult-to-insure horticultural crops Profit margin insurance Price and input cost insurance Incentives for private insurers to develop and operate alternate agriculture insurance products.

12 AgriInsurance in Canada Brad Klak, President and Managing Director Merle Jacobson, COO, Operations Division Agriculture Financial Services Corporation Alberta, Canada