Crop Insurance Market Assessment, By Type [Multiple Peril Crop Insurance, Actual Production History, Crop Revenue Coverage], By Coverage Type [Localized Calamities, Sowing/Planting/Germination Risk, Standing Crop Loss, Post-harvest Losses], By Insurer Typ (2024)

Crop Insurance Market Assessment, By Type [Multiple Peril Crop Insurance, Actual Production History, Crop Revenue Coverage], By Coverage Type [Localized Calamities, Sowing/Planting/Germination Risk, Standing Crop Loss, Post-harvest Losses], By Insurer Type [Private Institution, Public Institution, Government, Other], By Region, Opportunities and Forecast, 2017-2031F

Global crop insurance market is projected to witness a CAGR of 6.02% during the forecast period 2024-2031, growing from USD 42.38 billion in 2023 to USD 67.65 billion in 2031. Agriculture is one of the most important sectors and practices in the global economy. Good agriculture safeguards global food security; however, as the interests of farmers and cultivators who are directly involved in agriculture are always at stake, crop insurance emerges as an important tool. The global crop insurance market plays a critical role in safeguarding agricultural producers against the financial risks associated with crop losses due to natural disasters, adverse weather conditions, pests, diseases, and market fluctuations. Crop insurance provides vital protection to farmers, ensuring the stability of agricultural livelihoods, promoting food security, and supporting sustainable farming practices worldwide.

According to research by the Food and Agriculture Organization of the United Nations (FAO), approximately 1.23 billion people worked in the world's agrifood systems in 2019, which is almost half of the world's population living in households linked to agrifood systems. To safeguard the interest of such a gigantic population, crop insurance becomes a vital tool to secure economic uncertainties and the overall growth of the global economy. The global crop insurance market has multiple players ranging from government institutions to private players dominating the market by offering various products and services, aiming to mitigate the inherent risks faced by farmers and bolstering their resilience in the face of adversities.

Global crop insurance market has huge growth potential as the agricultural sector in developing and underdeveloped economies is largely not exposed to crop insurance. The global crop insurance market encompasses a diverse array of insurance products tailored to meet the specific needs of farmers and agricultural enterprises. There are different types of crop insurance, including yield-based insurance, which protects against losses in crop yield, while revenue-based insurance covers the declines in crop revenue due to price fluctuations or reduced yields.

In 2023, according to a report released by the Food and Agriculture Organisation of the United Nations (FAO), disasters have costed an estimated USD 3.8 trillion in crop and livestock production over the last 30 years, equating to an average loss of USD 123 billion per year or 5% of global agricultural GDP.

Government to Have a Major Role in Global Crop Insurance Market Growth

The government always plays a key role in protecting the interests of individuals and promoting the products and services that are in the interest of larger groups. In the same way government support, initiatives, and subsidies play a key role in driving the growth of global crop insurance market. Government initiatives incentivize farmer participation, mitigate financial risks, and promote agricultural resilience in the face of climate variability and natural disasters. Government subsidies reduce the cost of crop insurance premiums for farmers, making insurance coverage more affordable and accessible, especially for smallholder farmers and those in low-income regions. Governments establish policy stability and regulatory frameworks that support the growth of crop insurance markets. Clear regulations, risk management guidelines, and enforcement mechanisms create a conducive environment for insurers to operate and expand their offerings.

According to a federal watchdog study released on December 2023, over one-third of the United States government funding to ensure the nation's crops since 2011 has gone to insurance companies that profit from the program by more than USD 1 billion per year. The federal crop insurance program, operated by the United States Department of Agriculture, is designed to protect farmers from financial losses caused by natural disasters or other occurrences that result in crop losses or price declines.

Climate Variability and Extreme Weather Events Drives the Market Size

Extreme weather conditions and events drive the booming global crop insurance market. Climate variability and changes in weather conditions are linked with agriculture and crop yield as the changes in atmospheric conditions affect the crops and the agricultural yield. Climate change is leading to more frequent and severe extreme weather events, including droughts, floods, storms, heatwaves, and unpredictable rainfall patterns. These events can cause significant crop losses and yield reductions, highlighting the need for insurance protection against weather-related risks. These environmental factors underscore the vulnerability of agriculture to climate-related risks and highlight the importance of risk management strategies, such as crop insurance, in safeguarding farmers’ livelihoods and promoting agricultural resilience.

In 2024, A new study by CIMMYT has shown relations between rising temperatures and the destructive fungal plant disease wheat blast. The disease currently threatens 6.4 million hectares, and by 2050, climate change is expected to exacerbate the situation, threatening 13.5 million hectares of agriculture. Wheat blast has the potential to reduce wheat yield by 13% worldwide. South America and Africa will be the most vulnerable locations to wheat blast in the future climate, with up to 75% of their wheat acreage under threat by 2050.

Integration of Technology and Data Analytics

Over the years, the global crop insurance market has expanded for various reasons, mainly safeguarding the interests of a large global population engaged in the primary sector. However, the dynamics of the market are changing due to the adoption of technologies in various products and services. The trend is transforming traditional insurance practices, improving risk assessment accuracy, enhancing operational efficiency, and expanding insurance coverage for agricultural producers.

Remote sensing, along with satellite imagery and drones, is being implemented, enabling insurers to monitor crop conditions, assess vegetation health, and detect anomalies in real time. The data estimates crop yields, predicts potential losses, and facilitates faster claims processing. Access to historical weather data and advanced climate models allows insurers to quantify weather-related risks more effectively. By analyzing long-term climate patterns and seasonal forecasts, insurers can develop more accurate risk assessment models and offer customized insurance products tailored to specific weather conditions.

Due to innovative technologies such as Farmers Edge's FarmCommand and IBM's GenAI, crop insurance operations are now more efficient and effective. FarmCommand combines satellite imagery, weather data, and AI-powered analytics to give farmers actionable insights for improving crop management practices.

Future Market Scenario (2024 – 2031F)

In the coming years, the market will witness major changes in how the crop insurance industry offers its products, minimizes farmers' risks, and maximizes their profits. In this context, major players will incorporate various technologies like AI, blockchain, and data analytics based on different platforms.

Parametric and index-based insurance products will gain traction due to their simplicity, transparency, and scalability. These innovative insurance models offer faster claims settlements based on predefined triggers, such as weather indices, reducing administrative costs and improving risk management efficiency.

In the foreseeable future, the market will witness high growth in developing countries or underdeveloped countries of Asia, Africa, and South America as product awareness and acceptance will increase.

Key Players Landscape and Outlook

The outlook for global crop insurance market is positive, it is expected that the market will continue to grow and expand in the forecast period due to various market drivers such as support, schemes, and initiatives from governments, integration of technologies and data analytics. The increasing frequency and severity of climate-related risks drive the demand for crop insurance as a critical risk management tool. Farmers seek financial protection against weather extremes, market volatility, and production uncertainties, stimulating market growth. Continued investment in data-driven solutions and multi-stakeholder partnerships will further accelerate market development and expand insurance coverage for farmers worldwide.

In April 2024, Farmers Mutual Hail Insurance Company of Iowa (FMH) announced the acquisition of Global Ag Insurance Services, an AXA XL company that specializes in crop insurance. Global Ag, based in the western United States, specializes in providing a wide range of crop insurance solutions, including the USDA multi-peril crop insurance program as well as several specialty private and named peril products designed to meet the specific needs of agricultural producers and growers.