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Maria: What Is the Impact on Industry in Puerto Rico?

Peter Datin, senior principal modeler, RMS

Rajkiran Vojjala, vice president – Model Development, RMS

Last week, Hurricane Maria churned across Puerto Rico with the strongest winds to hit the island in over 80 years. Puerto Rico is home to more than 50 percent of the world’s leading pharmaceutical and life science companies, which operate around 80 U.S. Food and Drug Administration (FDA) approved manufacturing plants on the island. Therefore, the impact of Maria on the industrial line of business not only influences the overall losses experienced in the event, but critically has many ramifications for Puerto Rico’s long-term economic recovery.

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NFIP Losses from Harvey Estimated to Reach US$7-10 Billion

Pete Dailey, vice president – Product Management, RMS

On Wednesday, RMS reported that, based on our modeling, the overall combined wind, surge, and inland flood losses from Hurricane Harvey will be US$70-90 billion. My colleague, Daniel Stander, had previously also pointed out that “economic losses from Harvey will outstrip insured losses by a considerable margin.” That’s because the uptake of private flood insurance in the U.S. is very limited.

RMS continues to refine its estimate of the insured losses from Harvey. In the meantime, I think it’s worth looking in more detail at the potential exposure of the National Flood Insurance Program (NFIP) to this major hurricane.

Last Monday, Daniel wrote that it was likely that “Harvey will produce at least US$4 billion in flood claims, triggering the NFIP reinsurance program.” With NFIP up next month for reauthorization and reform, this is an important point — and not just for the 25 reinsurers underwriting over US$1 billion of NFIP’s claims.

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Harvey Shows the Advantage of Cloud Solutions When “Time to Insight” is Crucial

Farhana Alarakhiya, vice president – Products, RMS

Hurricane Harvey continues to be top of mind at the RMS offices. On Wednesday, RMS hosted a client webinar where Mark Powell, Tom Sabbatelli and Pete Dailey discussed how we have applied our methodology developed for the RMS U.S. High Definition (HD) Flood Model to provide insights to the extent and severity of the flooding from Harvey, with Houston as our top priority. This effort has resulted in a high-fidelity hazard inundation map which is now available to all RMS clients.

For clients on the RMS(one)® platform who use Exposure Manager, this effort goes one step further. We automatically seed the Harvey hazard layer in the client tenant, to deliver instantaneous access to analytic insights from the U.S. Inland Flood HD Model.  This models all sources of flooding across space and time, and can also be used to identify and differentiate locations at risk based on flood extent and severity.

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Harvey Now Driving Catastrophic Flooding Across Houston Metropolitan Region

(For media statement, click here)

Michael Young, senior director – Product Management, RMS

Hurricane Harvey is now driving catastrophic flooding across the entire Houston Metropolitan region. The behavior of the storm is almost without precedent, and Harvey has already broken all U.S. records for tropical cyclone-driven extreme rainfall with observed cumulative amounts of 51 inches (129 centimeters) – far exceeding Allison in 2001, along with Claudette in 1979, and Amelia in 1978, not only in volume but also regional extent.

While we will continue to refine our modeling parameters for the Category 4 wind and storm surge that Harvey generated on Saturday, our clear focus is now on the inundation of Houston, the fourth largest city in the U.S. The storm has achieved a paradigm shift, and we have mobilized all our capabilities to apply the tools, data and processes developed for the RMS U.S. High Definition (HD) Flood Model to provide insights to the extent and severity of the flooding, with Houston as our top priority.

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From Real-time Earthquake Forecasts to Operational Earthquake Forecasting – A New Opportunity for Earthquake Risk Management?

Jochen Wössner, lead modeler, RMS Model Development

Delphine Fitzenz, principal modeler, RMS Model Development

Earthquake forecasting is in the spotlight again as an unresolved challenge for earth scientists, with the world tragically reminded of this after the deadly impacts of recent earthquakes that hit Ecuador and Italy. Questions constantly arise.  For instance, when and where will the next strong shaking occur and what can we do to be better prepared for the sequence of earthquakes that would follow the main shock? What actions and procedures need to be in place to mitigate the societal and economic consequences of future earthquakes?

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China Upgrades Support for Agriculture Insurance

Right be­fore the Chi­nese New Year, the Min­istry of Fi­nance (MoF) in China re­leased up­dated guid­ance regarding agri­cul­ture in­sur­ance for the country. It has in­creased the pre­mium sup­port to­wards cen­tral and west China, and high­lighted its com­mit­ment in sup­port­ing its ma­jor three crop types: rice, wheat, and corn.

The guidance, which has been in effect since the start of 2017, sees the cen­tral gov­ern­ment in China covering 40 percent of the crop in­sur­ance pre­mium in cen­tral and west provinces, while for the east area it re­mains at 35 percent. Within counties and districts defined by the MoF as of significant agri­cul­tural importance, coverage will be fur­ther increased up to 47.5%.

More gen­er­ous sup­port from cen­tral gov­ern­ment is meant to fur­ther relieve some of the fi­nan­cial pres­sures experienced by provin­cial, pre­fec­ture, and county-level gov­ern­ments, as the new pol­icy sets a 20 percent pre­mium to be cov­ered by the farmer as the pre­con­di­tion to benefit from the increased support.

With this be­ing in­tro­duced, we believe that two ma­jor changes could take place. The first is the uni­fied pre­mium rate at provin­cial level, which will take the im­pact— and we could then see a county level rate struc­ture emerge. Sec­ondly, the insurance pen­e­tra­tion rate for rice, wheat, and corn, which currently averages around 70 percent in av­er­age, will see a ro­bust in­crease.

How AgTech Trends are Overcoming the Food Production Shortage: It’s All About the Data

There are many ways in which food productivity gains can and are be­ing achieved, but none are proving more ef­fec­tive than the ap­pli­ca­tion of tech­nol­ogy. Agricultural Technology, commonly abbreviated to AgTech or AgriTech, are the terms used to de­scribe the de­ploy­ment of this tech­nol­ogy within the agri­cul­tural sec­tor.

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India Reports PMFBY-Linked Crop Insurance Growth in 2016

Re­cent sta­tis­tics re­leased by the Gen­eral In­sur­ance Coun­cil of In­dia re­veal the extent of in­sur­ance pre­mi­um growth in the coun­try, and par­tic­u­larly in the agri­cul­ture sec­tor.

Agri­cul­tural in­sur­ance pre­mi­ums in­creased by 75 percent between April and Oc­to­ber this year, com­pared to the same pe­riod last year, fol­low­ing the launch of the Prad­han Mantri Fasal Bima Yo­jana (PMFBY) crop in­sur­ance scheme ear­lier in 2016 dur­ing the Kharif sea­son.

Pre­mi­ums col­lected for agri­cul­ture busi­ness rose to Rs 18,000 crore over the same pe­riod last year. This equates to just un­der USD $3 billion, mak­ing it the third largest agri­cul­tural insur­ance scheme in the world af­ter the U.S. (ap­proximately $9.75 billion in 2015) and China (ap­proximately $5.8 billion, of which 70 percent relates to crops).  Agriculture insurance premiums for India are now ahead of Japan, with premiums at approximately $1 billion.

The agri­cul­ture min­istry has also just an­nounced that 26.5% of farm­ers are now in­sured, an in­crease of 18.5% from the pre­vi­ous year. The agri­cul­tural area in­sured has in­creased by 15 percent. This compares to 23 percent of the agri­cul­tural area across the country being in­sured in 2014. The goal is to in­crease cov­er­age to over 50 percent of agri­cul­tural land.

Per­haps even more im­por­tantly – at least for the farm­ers who buy in­sur­ance – is that the to­tal sum in­sured has in­creased by 104 percent. In the pre­vi­ous in­sur­ance scheme, the sum in­sured cov­er­age was capped in or­der to min­imize pre­mi­ums. There­fore farm­ers who were in­sured could only re­cover a frac­tion of their losses. The new scheme pro­vides pre­mium sub­si­dies so that the sum in­sured can in­crease and farm­ers can re­coup all their losses when an event oc­curs.

Crop Cutting in Haryana State Halted: Technology to the Rescue?

The in­tro­duc­tion of the Pradhan Mantri Fasal Bima Yojana (PMFBY) in­sur­ance scheme in In­dia this year has led to a widely re­ported in­crease in the up­take of agri­cul­tural in­sur­ance across the coun­try.

The scheme has been wel­come news to the In­dian farm­ing com­mu­nity, who for many years have felt they were not com­pen­sated ad­e­quately or in a timely manner for losses in­curred dur­ing the grow­ing sea­sons. How­ever, there are a num­ber of as­pects to be ad­dressed be­fore the scheme can be con­sid­ered a suc­cess, and one of the most not­able is regarding Crop Cut­ting Ex­per­i­ments (CCEs).

CCEs are used to as­cer­tain the yield for no­ti­fied crops un­der the scheme, which are then mea­sured against the in­sur­ance threshold yields to de­ter­mine pay­out lev­els. They must be under­taken on-site prior to har­vest­ing and pose a lo­gis­ti­cal burden in terms of the timely and ac­cu­rate col­lec­tion of sen­si­tive data, es­pe­cially when they are re­quired in such high vol­umes, as tens of thou­sands of CCEs are re­quired across the coun­try.

Issues with collecting CCEs has recently made the news, with the suspension of all CCE activity in the northern state of Haryana.  Avoid­ing head­lines such as this recent quote from the Times of India is a pri­or­ity for what many hope is a step change in agri­cul­tural in­sur­ance in In­dia:

“It has also been de­cided that the work of CCE will be com­pletely sus­pended un­til the re­quired re­sources, trained man­power with enough bud­get is pro­vided”—Sushil Goyat, Pres­i­dent of Haryana Agricultural Development Officers As­so­ci­ation

Tech­nol­ogy has a role to play in re­duc­ing the logis­ti­cal bur­den of plan­ning, executing, and col­lect­ing CCEs and the data they gather. So far, satel­lite im­agery has been used to plan CCE sched­ules and the de­vel­op­ment of a new mo­bile application that is capable of ge­o-tagging photos should in­crease both the speed of per­form­ing each ex­per­i­ment and the con­fi­dence level in the data gath­ered. Yet there is more that could be done with ex­ist­ing data and crop mod­els to re­duce the need for such large vol­umes of CCEs whilst main­tain­ing or im­prov­ing ac­cu­racy.

China and India Step Up Agricultural R&D Spending

Two significant re­ports into global pat­terns in agri­cul­tural research and development (R&D) spend­ing have re­cently been published. Agri­cul­tural re­search is crit­i­cal for greater pro­duc­tiv­ity, ef­fi­ciency, and poverty re­duc­tion. Rapidly grow­ing coun­tries with large farm­ing pop­u­la­tions such as China and In­dia have paved the way in im­ple­ment­ing agri­cul­tural in­sur­ance schemes and are in­vest­ing heav­ily in agri­cul­tural R&D.

In its lat­est re­port on the land­scape of agricultural research and development in India, the In­ter­na­tional Food Pol­icy Re­search In­sti­tute (IF­PRI) finds that In­dia has one of the best-staffed agri­cul­tural re­search and de­vel­op­ment sys­tems in the world. The IF­PRI pro­vides a global data­base of agri­cul­tural re­search in­vest­ment through its Agri­cul­tural Sci­ence and Tech­nol­ogy In­di­ca­tors (ASTI) pro­gramme. This report published in Au­gust re­veals that agri­cul­tural re­search spend­ing in In­dia has significantly increased from US $616 million in 2000 to $1.06 billion in 2014 (at constant 2011 US Dollar value), en­sur­ing that re­search keeps pace with in­fla­tion and the growth in GDP.

As a per­cent­age of GDP generated by agriculture, In­dia spends 0.3% of its “AgGDP” on agri­cul­tural re­search, which rep­re­sents a much higher share than neigh­bor­ing Pak­istan (0.18%), but only half the share in­vested by China (0.62%). It is also con­sid­er­ably less than the 1.8% spent by Brazil. How­ever, in terms of re­searchers, In­dia em­ploys more than dou­ble the num­ber of re­searchers as Brazil does, with 12,750 peo­ple em­ployed in this sec­tor (ex­clud­ing the pri­vate re­search in­dus­try), com­pared to 5,800 in Brazil. Given the very dif­fer­ent pop­u­la­tions and struc­ture of the farm­ing in­dus­try, this rep­re­sents a ra­tio of only 4.6 per 100,000 farm­ers in In­dia, com­pared to 57 per 100,000 in Brazil.

An­other analy­sis re­cently pub­lished in the journal Nature in Sep­tem­ber 2016, based on a data se­ries main­tained by the Uni­ver­sity of Min­neso­ta In­ter­na­tional Sci­ence and Tech­nol­ogy Prac­tice and Pol­icy (In­STePP) Cen­ter in St. Paul, shows that for the first time in mod­ern his­tory, mid­dle-in­come coun­tries are in­vest­ing more in pub­lic-sec­tor agri­cul­tural re­search and de­vel­op­ment than high-in­come ones. They also note a sig­nif­i­cant in­crease in the role of pri­vate-sec­tor agricultural R&D in com­par­i­son to gov­ern­ment funded agricultural R&D. For mid­dle-in­come coun­tries, the pri­vate pro­por­tion of do­mes­tic spend­ing was 37 percent in 2011 com­pared to 19 percent in 1980.  They par­tic­u­larly high­light China, where more than $6 bil­lion, or around 57 percent of the coun­try’s en­tire do­mes­tic agricultural R&D spend­ing, came from the pri­vate sec­tor in 2011.

The Na­ture study high­lights that while mid­dle-coun­tries’ in­vest­ment on agricultural R&D has in­creased sig­nif­i­cantly, in low-in­come coun­tries it re­mains rel­a­tively sta­tic, and that on a per capita ba­sis, in­vest­ment by low-in­come coun­tries has shrunk con­sid­er­ably – par­tic­u­larly for nations in South Asia and Sub-Sa­ha­ran Africa. They note that with­out ef­forts to im­prove the global spread and adap­ta­tion of lo­cally rel­e­vant tech­nolo­gies, it is likely to get much harder for poor farm­ers to feed them­selves, let alone their na­tions’ in­creas­ingly ur­ban­ized pop­u­la­tions.