Optima Insurance Brokers Pvt. Ltd.


Our views on important risk issues and emerging risks.

Global reinsurers reduce exposure to crop insurance.

July 31, 2017

The Indian government-sponsored crop insurance scheme (PMFBY) launched last year is losing its sheen for the global reinsurers.The coverage under the scheme has increased to 40 percent of cropped area in FY17-18. More than 1 million farmers have been given cover under this scheme, making India the third largest agriculture insurance market in the world after US and China.

The PMFBY will have a higher profile in FY2018 as the government has allocated INR90 billion (US$1.4 billion) for the scheme but may have to increase the provision. In 2016-17, the government allocated INR55 billion but later revised the Budget estimate to INR132.4 billion. Data from the General Insurance Council showed that compared to a market share of 5.5 percent in FY16, it grew to 16.1 percent in FY17.

Although claims amounted to a little over INR59.6 billion against more than INR158.9 billion in premiums, the global reinsurance have reduced their exposure. While the domestic reinsurer, General Insurance Corporation of India (GIC Re), is providing cover for crop insurance, this may not be adequate when 50% of cropped area is to be covered in FY19. Global reinsurance support would be required for that.

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