Webinar - Forest Risk and Insurance

IEFC Planted Forests

22/01/2024

Let's Talk About Planted Forests Webinar Series of IEFC.

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00:00:00 Good morning, ladies and gentlemen, and welcome to this.

00:00:12 Let's talk about planted forest webinar.

00:00:14 So I am Christophe Razio, the head of IEFC, European Institute for Planted Forest, Institut

00:00:21 Européen de la Forêt Cultivée in French.

00:00:26 I'm pleased to welcome you for this webinar.

00:00:31 This webinar is part of a series of webinars we are organizing regularly now for one year.

00:00:39 It's very relevant for us, an institute dealing with planted forest, to have a focus on insurance.

00:00:47 Why?

00:00:48 Because what makes the difference between planted forest and other forests?

00:00:52 That someone decides to plant, so he has to decide what to plant, where to plant, and

00:00:57 it has a cost.

00:00:59 And so when you invest in something, it is important you can tell your asset, it is important

00:01:10 you can insure it.

00:01:12 And as we know, we are in a situation where there is more and more risks threatening the

00:01:16 forest.

00:01:17 Global change implies warmer and drier climate.

00:01:22 Climate change also implies more traffic, more world trade, with containers traveling

00:01:30 from China, USA to Europe, and bringing beetles and all the pest and diseases.

00:01:36 So many threats that make the forest business more and more uncertain.

00:01:44 So I'm very glad that we can welcome three speakers.

00:01:48 So you can see on the slide, these webinars are organized on behalf of IEFC, but also

00:01:53 on behalf of the EFI Research Network on Planted Forest, and behalf of the IEFO Task Force

00:02:00 on Planted Forest.

00:02:03 And so today we have three very good speakers.

00:02:10 So we have Guillaume Bouffard from MISO Group PAMA, who will talk about recent bushfires

00:02:16 in Australia and France, and lessons learned for an insurer specialized in forest risk.

00:02:25 So MISO is a member of IEFC, and we had a lot of opportunities to discuss about the

00:02:31 risk evolution, and we had the chance to go in Australia, so we will tell you more about

00:02:35 what we have learned there.

00:02:37 The second speaker is Phil Cotto from Forestry, a consultant agency, very much aware of forest

00:02:47 issues also, and we will give a different perspective on how to protect your forestry

00:02:52 investment, overview of climate and loss profile, extreme and risk management.

00:02:59 And the third speaker is perhaps something less known by the forest community.

00:03:04 It's Peter Welton from the Swiss Reinsurance Company.

00:03:10 So the reinsurance, the kinds of insurance for insurers, he will explain that to you.

00:03:17 And this is where we can mutualize the risk at the continent level, at very broad level.

00:03:23 I see that we already have 40 attendees, so I think we can start.

00:03:30 So I will give the floor to Guillaume Bouffard from MISO Groupama.

00:03:38 Guillaume, the floor is yours.

00:03:42 Thank you very much, Christophe.

00:03:45 Can you see my screen?

00:03:46 Yes, perfect.

00:03:47 Perfect, very good.

00:03:48 So good afternoon or good morning, everyone, depending on your location, I guess.

00:03:54 So my name is Guillaume.

00:03:55 I'm heading Groupama Forêt Assurance, otherwise called as MISO, established in Bordeaux in

00:04:01 France.

00:04:02 And I will talk through a short presentation about recent bushfires in Australia and France,

00:04:10 and especially commenting on the lessons learned from an insurer perspective, which is focused

00:04:16 on the risk on the forest, which is what we do.

00:04:20 So I suggest I quickly go through what we do at Groupama Forêt Assurance, a brief introduction.

00:04:28 I will then detail a little bit more of the experience.

00:04:31 And then, of course, the lessons learned and what we plan to adapt in our contracts, what

00:04:36 we call our response to these recent circumstances.

00:04:40 And then I think, Christophe, we're open to questions and answers.

00:04:46 So briefly, Groupama Forêt Assurance, GFA, is the most historic player, actually, in

00:04:55 forest insurance.

00:04:56 We were established in 1947 in Bordeaux, initially locating or specializing only in the southwest

00:05:04 of France, mainly Gironde and L'Ande, for the ones who know.

00:05:10 And this region is characterized by pine trees, plantation forests, which is the biggest forest

00:05:16 of that kind in Europe, I believe.

00:05:19 So initially focusing on this area, today we are active in the entire French territory,

00:05:26 still specializing only in forests.

00:05:29 So we insure only forest and forest owners.

00:05:33 Our solutions include coverage for damages, which we classify into two categories mainly.

00:05:41 So fire, of course, that's what will occupy us today.

00:05:44 But also wind, storm, and that includes the weight of snow, the hail risk, and also the

00:05:50 frost.

00:05:51 So that's one big category of what we do.

00:05:54 The most, the biggest activity of what we do is insuring damages.

00:05:58 So we insure the trees for damages caused by fire and wind mainly.

00:06:02 And the other thing, the other pillar of what we do is we add civil liability coverage for

00:06:07 the forest owners or their workers, whilst they're working in the forest, plantation

00:06:12 forest, doing some maintenance and managing the forest.

00:06:16 This is a niche market, pretty much, as you can imagine, in France.

00:06:21 There are three players overall.

00:06:22 We're one of them.

00:06:24 There are only two players today active in this market.

00:06:29 This is a niche market.

00:06:30 Also, that's why we're not so many focusing on it, because, you know, as you may know,

00:06:36 roughly there are 17 million hectares of forest in France, and only about 10% of that is insured.

00:06:45 So you know, that is a small market.

00:06:50 And the first two players, we're one of them, we account for 75% or 80% of the surface is

00:06:57 insured.

00:06:58 So just to give you an idea of the market, which is a niche market, but still important

00:07:03 in terms of commitment and liabilities, because in our case only, we insure thousands of forest

00:07:10 owners, which represent over 500 million euros of commitment.

00:07:18 So you can already see that, you know, we are effectively exposed to climate risk, and

00:07:25 we face climate risk, and we live with climate risk.

00:07:28 So that's a key issue.

00:07:32 That's for us, Groupe Amin Foret Assurance, and briefly what we do.

00:07:37 As you may remember, 2022 in France has been a very bad year from a fire perspective.

00:07:46 And especially in our region here in the southwest of France, there has been many fires as every

00:07:52 year, but two main ones, which were of atypical importance.

00:07:56 This is what I will comment now very briefly.

00:08:02 So in the summer of 2022, which is of course the mostly exposed season for fires in France,

00:08:08 the summer period, there have been 20,000 fire events.

00:08:13 So in the entire French territory, 12 of these events have represented or covered more than

00:08:19 1,000 hectares each, which is a lot.

00:08:22 And in total, there have been 72,000 hectares burned, with an average compared to an average

00:08:29 of 20,000 years typically over the last 15 years.

00:08:32 You can see on the right-hand side of my slide the surfaces burned by the fires over the

00:08:39 last 30 or 40 years, within two categories, what we call the Mediterranean area, which

00:08:47 is of course the biggest exporter area of France and French territory, not the biggest

00:08:52 in terms of forest as plantation forest, but a region which is primarily exposed to fires

00:08:59 because of the heat and drought.

00:09:01 So that's the blue part, which you can see every year, it's not new.

00:09:05 There has been a lot of years impacted by massive surfaces burned.

00:09:10 What is less typical is the red part, which is the rest of France.

00:09:14 And you can see that 2022, which is the very last year on the chart, has represented a

00:09:19 very significant volume, which we had not seen since 1976, roughly.

00:09:24 So that's a very exceptional year for us in 2022.

00:09:31 What is interesting to note in this year also, I think, is that 70% of these events were

00:09:37 not based in the Mediterranean area.

00:09:40 They were based in other parts of France.

00:09:42 Of course, as I mentioned, the southwest region of France has represented quite a lot, which

00:09:47 is representing for 50% roughly of this total.

00:09:51 But also Brittany, which is very much north in France.

00:09:55 Pays de Loire, also Jura area, have been severely and unusually impacted by fires in 2022.

00:10:05 This year was marked by exceptional weather circumstances, of course, as you can imagine.

00:10:09 It was the second driest year since 1976, so a very, very dry year.

00:10:13 And also the second warmest year since 2003, so 2003, which was our record year in terms

00:10:19 of temperature in France.

00:10:22 So very adverse conditions, which have created very adverse fire circumstances in France,

00:10:30 but mainly in the southwest area.

00:10:39 Combined with this event, a lot of scientists make projections and they use a number of

00:10:44 composite indices to try to project and forecast what will be the situation in the future.

00:10:50 I'm going to show you in the next two slides just a projection.

00:10:55 The first one has been built by Météo France, which is our weather forecast organization

00:11:00 here in France, national.

00:11:03 And you can see from 1990 to mid-century, 21st century, a projection of what will be

00:11:09 the number of days per area where the first index, which is the WFI or IFM in French,

00:11:18 where this index exceeds the value of 40.

00:11:23 The value of 40 is meant to represent a significant risk of fires in the forest.

00:11:29 And you can see a deterioration, which is projected by the middle of the century, of

00:11:35 course, with a severe increase in number of days, where this index is projected to be

00:11:42 above 40.

00:11:44 In a similar way, the next slide with another index, the IEP index, again is a composite

00:11:51 index trying to project the probability of significant fires.

00:11:57 And gives you here, under two different scenarios, one is qualified as high risk, where the index

00:12:04 is over 4, and the other one, the below part of the chart, represents the projections where

00:12:11 the IEP index is above 5, which represents a very high risk.

00:12:15 So high risk on the top and at the bottom is the very high risk.

00:12:19 And here you can see, similarly to the first part, a projected increase, a very significant

00:12:25 increase of the number of days where this index is classified as high risk or very high

00:12:31 risk between now and to 2085, which is the time horizon of this chart.

00:12:38 This brings us to a point in France, for example, where in 2085, under these projections, virtually

00:12:47 a third of the year, so 120 days, will represent days where the index is representing a high

00:12:54 risk of forest risk per year.

00:12:58 So a third of the year is exposed by horizon 2085.

00:13:05 So needless to say that these projections are not good.

00:13:10 So overall, this recent experience in France in 2022 and these projections have had some

00:13:16 consequences and I think have had quite a few impacts in France, generally speaking,

00:13:22 probably even beyond that, probably mostly in Europe, and it locally certainly created

00:13:27 a trauma.

00:13:28 You know, we've seen pictures of the Dune of Pilar, nearby forest burning, which is

00:13:34 a very touristic place.

00:13:35 In the middle of the summer, this has really raised awareness of the mass population towards

00:13:41 this risk of fire in the forest and also created locally a trauma, you know, even for the forest

00:13:47 owners community, it has been quite a shock.

00:13:51 This has had also some consequences, very dire consequences in the insurance business.

00:13:56 One of our competitors, you know, there are only three, as I mentioned, but one of them,

00:14:00 an important one, suspended a new business.

00:14:03 You know, he's put on hold every new contract since these fire episodes because he was severely

00:14:10 impacted by the claim costs that he had to suffer from these fires.

00:14:16 Us, you know, we've had to significantly increase our tariff on fires, which were unchanged

00:14:23 for many years, but these are significantly increased in 2023, for example.

00:14:30 And as we saw, you know, the forecast and the projections by the scientists indicate

00:14:34 that this risk will not diminish.

00:14:37 On the opposite, the material increase of the risk in the future is forecast.

00:14:43 That brings us, of course, serious doubts, you know, as to the future business model

00:14:47 in terms of insurance company focusing on the risks on the forest, you know, and depending

00:14:53 or looking at the trajectory, expected trajectory of these risks in terms of frequency of the

00:14:58 events, the potential impacts also and magnitude of these impacts has led us to question ourselves

00:15:06 in this industry.

00:15:08 And logically, I think, also explained the need for looking at what the others do and

00:15:15 especially perhaps visiting at other countries which have been historically more impacted

00:15:20 by these big fires than us, like Australia.

00:15:24 Look at what they do, look at their practices and try to understand how they could mitigate

00:15:29 how they face these challenges and how they adapted their potential insurance contracts.

00:15:36 And this is why we've decided to organize a visit to Australia.

00:15:40 I think, Christophe, you mentioned it in your introduction.

00:15:44 And this was in April 2023, where Groupama Forêt Assurance, every two or three or four

00:15:51 years, you know, we organize such trips abroad by trying to understand and learn from the

00:15:58 experience of others.

00:15:59 So this is not new.

00:16:00 But the choice of Australia, which is a long way from home and a significant travel expense,

00:16:09 was directed by the significance of the fires we had seen in 2022 in our region.

00:16:15 So we thought it was deserving the effort.

00:16:21 So we put together 30 or so experts of forest insurance and forestry in general and went

00:16:28 and visited Australia for two weeks.

00:16:30 So Australia is big.

00:16:31 So we couldn't, you know, within two weeks do everything in the country.

00:16:36 Nonetheless, we've traveled from west to east pretty much.

00:16:40 And we visited quite a few surfaces of forests.

00:16:44 It was very interesting.

00:16:46 Just to give you an idea, Australia is 14 times bigger than France.

00:16:50 There are 134 million hectares of forest, which is eight times more than France, of

00:16:55 which, though, you know, 130 roughly is made of native forest and only two million hectares

00:17:01 of plantation forest, which is mainly pine, radiata, the radiata pine and eucalyptus.

00:17:08 And of course, this region was particularly relevant because it's often marked by big

00:17:13 fires, but especially in 2019 and 2020.

00:17:17 So around Christmas area for them, for us, which is in the summer for them, they were

00:17:24 marked by a very big fire that we all remember, a fire episode.

00:17:30 So 18.6 million hectares were burned.

00:17:34 There were 33 people dead.

00:17:36 100,000 people had to be evacuated and causing one billion dollars of damages, which is very,

00:17:43 very significant.

00:17:45 And what we already saw in the statistics is that plantation forest suffered less comparatively

00:17:51 to the native forest.

00:17:52 You know, that's interesting to note for the next presentation.

00:17:58 So what were our learning points?

00:18:01 The learning points we took away from discussing with experts locally and visiting all the

00:18:06 forest was that clearing, you know, forest brush removing practices is a key mitigation

00:18:13 factor.

00:18:14 You know, so whether it's prescribed burning or mechanic clearing, but the frequency and

00:18:20 the parameters are key practice to mitigate the risk of fire.

00:18:25 We believe so here too, but I was very reassuring and enlightening to note that they were of

00:18:31 this commentary.

00:18:34 Also very interesting for them is that despite knowing or recognizing that effective clearing

00:18:42 is very important, the actual amount of volume of bushes cleared is too low.

00:18:49 So they're setting targets of hectares per year to be cleared and they consistently fail

00:18:56 to meet these targets.

00:18:58 Another very exciting point that arose from our visit was to say that the native forests,

00:19:04 you know, which are no longer managed really or the timber is not really exploited anymore

00:19:09 due to some cultural pressure, you know, a lot of trends to give back the forest to the

00:19:16 local native nations of aborigines nations, you know, meant that a lot of these forests

00:19:20 are no longer managed.

00:19:22 And what they saw is that the native forests were much, much more exposed to fires than

00:19:28 the plantation forests.

00:19:29 And this is because they were not managed as simply as that or not as well managed or

00:19:37 than the plantation forests, which is also a very key point to take away for prevention

00:19:42 that we will see later on.

00:19:45 And another very striking point for me and the insurers that we were is that forest insurance

00:19:51 had disappeared in Australia.

00:19:53 You know, there's only one player left, I believe, which is very playing on the on the

00:20:00 insignificant volumes.

00:20:02 But basically, the premiums increase were so high that the potential insurer decided

00:20:07 not to insure anymore.

00:20:09 So you can see here clearly a consequence of big claims and control claims, scary claims.

00:20:14 The insurers left the market, basically.

00:20:19 So of course, all these interrogate another insurer like us.

00:20:23 And we've tried to digest and adapt the way we do things.

00:20:30 And that's what we're going to see now very briefly in our case at Groupama Forest Insurance.

00:20:38 So the lessons learned as we saw is that the climate change increases the risk of fires.

00:20:42 The risk is higher today and is predicted to increase further.

00:20:47 Not only that.

00:20:48 Yes.

00:20:49 Can you click on Masquet at the bottom because we are hiding a bit of the slide.

00:20:54 Masquet.

00:20:55 Yes.

00:20:56 Sorry.

00:20:57 Yeah.

00:20:58 Noted.

00:20:59 Good.

00:21:00 Thank you.

00:21:01 So the risk is expected to increase and also the risk is meant to spread over the full

00:21:06 French territory.

00:21:07 Historically, in France, the south is much more exposed.

00:21:11 That's where most of the fires were seen before.

00:21:15 They project, scientists project, a very big spread of that risk under the full territory,

00:21:21 which is very important for these new territories that were not impacted and will have to be

00:21:26 impacted to respond to this impact future.

00:21:30 Extreme conditions like in Australia could be seen in France.

00:21:32 That's also something that seems to emerge.

00:21:36 An increase of awareness of the risk, that's a good thing of all these events, is seen.

00:21:40 So that is good because the population is more aware.

00:21:44 Information knowledge sharing, training on fire prevention and management must be spread

00:21:48 into the newly explored territories as we saw because they don't know yet very well.

00:21:52 They have no experience.

00:21:54 The seeds, improvement on the seeds will also play a role because you cannot plant maybe

00:22:01 all the plantations or the type of trees in every area as before.

00:22:07 You will have to adapt also the type of plantations.

00:22:10 That's something to a learning point.

00:22:12 What we learned also is that what we retain is that plantation forests, which are professionally

00:22:17 managed, cleared, well maintained, is a significant less exposed territory than the unexploited

00:22:24 forest.

00:22:25 And also, profitable and economically viable forests, of course, provide the means to better

00:22:32 prevent, better fight against these fires, which is also a key point for us to take away.

00:22:37 So with climate change and the related increase in risks, of course, the forest insurance

00:22:42 industry is under a strong dilemma because it's a potential profitability crisis for

00:22:48 the insurer.

00:22:49 Of course, with the cost of claims going up, we cannot necessarily compensate that by the

00:22:54 premium increase.

00:22:55 And in the same time, as we saw in Australia, can the customers absorb all the increase

00:23:01 that are necessary to compensate for these risks?

00:23:04 So maybe they cannot afford the future cost of the insurance, which is also a very important

00:23:11 point to us.

00:23:13 And as we saw in Australia and as we see in other markets in California or in the US or

00:23:19 in the UK for certain risks also, is that some of the players start to withdraw coverage

00:23:24 in certain type of risk in certain areas as a result of climate change.

00:23:28 So this is the key challenges that the industry, we believe, faces, certainly a player like

00:23:32 us, and we need to adjust.

00:23:34 So this implies adjustments to the business model.

00:23:37 And the good news is, is that we believe that solution exists.

00:23:40 Although we recognize the need for adaptation, we also believe that solutions exist and enable

00:23:47 us to continue to protect our customers.

00:23:52 Really in concrete, just to briefly terminate, we believe that our response to these phenomenons

00:24:00 will be contracts and tariff changes.

00:24:03 So we will adapt our contract, we have started already, also to better price.

00:24:10 We will increase the tariff.

00:24:11 This is inevitable.

00:24:12 So slowly but surely, there will be increases in the cost of insurance for this type of

00:24:17 coverage because the risk is much higher.

00:24:20 And we'll also promote risk reduction incentivization.

00:24:24 We plan to provide different tariffications depending on the good practice of the properties,

00:24:31 which is very interesting because people will be able to benefit from best practice of management

00:24:37 compared to other people that do not apply similar best practice.

00:24:41 We'll also have to put in the contract certain exclusions, enclosures, and play with deductibles

00:24:47 at some point.

00:24:49 So this is a very key and dramatic in a way, but very understandable consequence of these

00:24:58 events.

00:24:59 An adaptation of the contracts, promoting good practice and an increase in tariff.

00:25:06 We will try to limit it, but we won't avoid it.

00:25:09 Then of course another key point is to promote risk awareness, promote insurance, and enhance

00:25:14 the mutualization effect.

00:25:15 The more people we have insured, the better we're globally protected.

00:25:19 It's the mutualization effect of insurance.

00:25:21 As we saw in the earlier part of my presentation, only a few, only too little of the surface

00:25:30 of forest in France gets insured.

00:25:32 Only 10%.

00:25:34 The market potential is big, which is good, but also that will enhance the protection

00:25:38 of everyone.

00:25:40 A key point we put together in that Groupama for Réassurance is really to develop our

00:25:45 business base to convince customers to get insured for the benefits of all.

00:25:51 Another pillar of the response is to partner with peers, public agencies, and regulators

00:25:58 to develop what we call shared services, tools, and platforms to better risk map the different

00:26:06 risk areas, share open source data models to better price, better access, and better

00:26:12 protect.

00:26:13 We also plan to participate with the forest industry, the peers, and the regulators to

00:26:17 promote prevention because we saw there are some prevention means that can really improve

00:26:22 the situation.

00:26:23 We want to play that part also, and we convey the right messages and probably will participate

00:26:31 in the training of some areas to the forestry industry.

00:26:37 And of course, we have to also manage, which is a good transition perhaps for the next

00:26:42 presentation, is reinsurance and national pooling is also a key concern for us because

00:26:49 there is certain pressure, of course, is put on the biggest reinsurance players in the

00:26:55 world due to climate change, which not only impacts the forest but the entire spectrum

00:27:01 of risks, and therefore they're under pressure.

00:27:05 We need to imagine other mechanisms of national pooling like we saw, for example, for the

00:27:10 ones who know, in the agriculture in France, we have adopted a so-called MRC, multi-risk

00:27:19 climatic record for agriculture, where there is a multi-layer protection system where the

00:27:24 first part of the risk is assumed by the farmer, the second part is insured under coverage

00:27:30 of the private insurance sector, and the last part, which is for extreme events, the state

00:27:36 solidarity fund kicks in.

00:27:39 We believe that such a system in forestry could very well work as well.

00:27:44 As a conclusion, sorry, because I can see the time is passing quickly, there is a climate

00:27:49 change impact, but despite the climate change and its challenges that it brings, Groupama

00:27:54 Forêt Assurance remains committed to support forest owners and their plantation forest.

00:27:59 I think it's for the benefit of plantation forest owners, but also for the benefit of

00:28:05 all, as we know, forest plays a key role beyond plantation industry, for all of us in terms

00:28:12 of carbon sequestration and other benefits.

00:28:16 Thank you for your attention.

00:28:18 Thank you very much, Guillaume.

00:28:19 Yes, you have been a bit longer, but I think it was interesting.

00:28:23 So it's time for questions anyway.

00:28:26 I don't see any hand up, so don't be shy, ask questions.

00:28:31 Just to warm up, may I have a question?

00:28:33 You said that you increased the prices of the insurance, but at the same time, you say

00:28:38 that you need more people insured.

00:28:41 So what is the situation?

00:28:42 Are you getting more and more people getting insured or the prices, they are reluctant

00:28:48 to pay more?

00:28:49 Yeah, you're right.

00:28:50 So price sensitivity is a key question and an unknown question.

00:28:54 It's a very good question.

00:28:56 Thank you.

00:28:57 So we have increased further the prices this year, so about roughly 10% overall, overall

00:29:03 our tariff, which is not insignificant.

00:29:06 And despite that, we see an increase in demand.

00:29:09 I think people now realize the risk much better.

00:29:13 There is a risk awareness.

00:29:14 That's the good things out of the big dramatic events that we lived in 2022.

00:29:21 People see on TV and everywhere, you know, that the climate is impacting many, many different

00:29:28 areas of the nature.

00:29:31 Forest is of key importance.

00:29:33 So I think there's a true awareness increase, which is a good thing.

00:29:37 And we face more demands than before.

00:29:40 So I expect this 10% proportion that I mentioned earlier to grow.

00:29:43 I can't promise it will be 30% by next year.

00:29:47 I wish, but it will increase.

00:29:50 And we can see that despite the increase in tariff.

00:29:54 So I'm optimistic.

00:29:56 There is a question in the chat.

00:29:58 So I will give the floor to Wies Caspal.

00:30:01 So you can make your question.

00:30:03 Turn your microphone on, please.

00:30:11 Can we hear Wies Caspal?

00:30:13 No.

00:30:14 I don't know.

00:30:15 Suzanne, you have to grant him.

00:30:16 OK.

00:30:17 Hello.

00:30:18 Hello.

00:30:19 Hi.

00:30:20 Hello.

00:30:21 Thank you.

00:30:22 You can speak.

00:30:23 OK.

00:30:24 First of all, good evening from India.

00:30:25 I'm basically a faculty member of forestry subject here in one institute of Dehradun.

00:30:37 So my question is regarding the presentation here regarding the insurance of forest plantation.

00:30:45 So my just only one question from Indian context that what are the possibilities for the forest

00:30:55 insurance, forest plantation insurance in our country as because of a major portion

00:31:02 of the plantation comes under the government control.

00:31:06 So can you give any idea regarding the private plantation?

00:31:12 How can they go for the plantation insurance?

00:31:17 In India, you mean?

00:31:19 Yes, sir.

00:31:20 So I have no clue.

00:31:21 I must admit, I apologize.

00:31:23 But I don't know.

00:31:24 I don't know the forest characteristics or your markets at all.

00:31:31 So I cannot comment.

00:31:33 I'm sorry.

00:31:34 But this is a country which we haven't explored yet.

00:31:37 We've been in China.

00:31:39 We've been in Chile and other countries of South America.

00:31:43 We've been to Australia recently.

00:31:44 We've been to Spain and Portugal before.

00:31:47 So these are countries where I could a little bit speak of.

00:31:50 India, I'm afraid I have no clue.

00:31:53 Maybe Christophe has some clue.

00:31:56 OK.

00:31:57 OK, sir.

00:31:58 No, but I think I think we will have to do.

00:32:03 He wants to go now.

00:32:04 Yeah, this is a place to explore because actually India is also involved in more and more plantation

00:32:10 issues.

00:32:11 Which is very interesting to note.

00:32:14 So thank you for your question because we're interested to identify the countries which

00:32:20 are relevant for us to study and to compare.

00:32:23 So that's a very good point.

00:32:24 Thank you.

00:32:25 Because there are many issues regarding.

00:32:27 However, the forest department already do the plantation thing, plantation of different

00:32:34 species in every year.

00:32:36 But in maximum cases, these are not successfully retained later on.

00:32:42 And some plantation adopted by the some wood based industries, they maybe go for that.

00:32:50 So I just want to know are they are doing or not or some part of India, these type of

00:32:56 incidents of plantation practice.

00:32:58 OK.

00:32:59 What I suggest is that we go on with other talks and perhaps you will get input from

00:33:06 other speakers later on.

00:33:09 So thank you very much, Guillaume.

00:33:12 Thank you, Vikaspal.

00:33:13 And now I will give the floor to Phil.

00:33:18 So Phil Coulthill from the consultant group Forestry.

00:33:23 So we will have a different perspective, a bit less French now.

00:33:26 So Phil, I give you the floor.

00:33:29 Try to make it in 20 minutes, please.

00:33:34 And your microphone on, please.

00:33:42 Great.

00:33:45 And you'll see that.

00:33:46 Is that.

00:33:47 Yes, it's perfect.

00:33:48 You can go.

00:33:49 You can go.

00:33:53 Great.

00:33:56 Good day to everybody, wherever you are.

00:33:59 However, let's let's press on.

00:34:03 So the I suppose the background to to my presentation is I've spent an awful lot of time, really,

00:34:09 certainly over the last 10 years, trying to talk to investors and forest managers about

00:34:15 the nature of risk in forestry.

00:34:17 So very much ties in with what we've just seen.

00:34:22 And and there's always a glitch there.

00:34:28 And here we are.

00:34:29 So our background is we we've done risk analysis all over the world.

00:34:34 And that map that just shows where forestry enterprises that I have looked at and written

00:34:42 profiles on and so on.

00:34:45 We're in this industry because we believe it really is the key to short term climate

00:34:48 and environmental improvement.

00:34:50 There is no other game in town as far as I'm concerned.

00:34:53 So we just need to keep them offering some means of risk, risk management for investors.

00:35:03 And as forestry ourselves, we currently are involved in various EU projects as a sort

00:35:07 of R&D about what's happening in the industry.

00:35:11 We are associated with insurance agencies.

00:35:14 So currently that is a globe underwriting in London.

00:35:19 And we have a portfolio across 30 countries, six continents.

00:35:24 And we are beginning to focus more on risk management, as we saw in the last presentation,

00:35:29 actually.

00:35:30 So three things I'll belt through at a fair rate.

00:35:35 Characteristics of our changing climate, which has been touched on, but I'll share a few

00:35:42 more things with you.

00:35:43 The pattern of climate related losses in forestry.

00:35:45 Again, we've seen an example in France and I'll show you some other ones.

00:35:49 And finally, very topically, how do we reduce insurance costs?

00:35:54 So characteristics of our changing climate.

00:35:58 The cause of extreme weather events is, of course, increased global temperatures and

00:36:01 as a consequence of that, you get increased energy and increased water in the atmosphere.

00:36:07 And this little chart, which I rather like, so no apologies for showing it again if anybody

00:36:11 has seen it, is it's 48 years since we last had a year that was cooler than average.

00:36:17 It is a stunning statistic.

00:36:19 And of course, last year was the hottest on record since 1850.

00:36:26 Quite extraordinary.

00:36:28 And as you see, the 10th year where prices have exceeded one degree above pre-industrial

00:36:35 period.

00:36:38 You can see the increase in above pre-industrial baseline.

00:36:41 There's 1.46 degrees.

00:36:43 We have El Niño affecting us now, so it's adding another 0.2 degree.

00:36:47 I don't know why I'm laughing, but the prediction for 2024 is it's going to be another hot year,

00:36:55 possibly a record breaker again.

00:36:57 So this is something, you know, it's here to stay, isn't it?

00:37:01 And we must all try and manage this the best we can.

00:37:05 A few slides of what has happened under the increasing temperature where we are experiencing.

00:37:12 So we had Hurricane Ian back in the US at the end of 2020.

00:37:18 In New Zealand, Gabrielle swept through the country.

00:37:21 For us, it didn't do a lot of damage, but there was an extraordinary amount of property

00:37:25 damage from the forest as prunings and other debris was washed into local communities.

00:37:33 That was the surprise, I think, from Gabrielle was the widespread nature of Gabrielle was

00:37:39 not just in the forest.

00:37:41 Flooding Nigeria or whatever, two thirds of the country, three quarters.

00:37:46 Colum has already mentioned the Australian black summer of 2020.

00:37:52 And we started the last year with Chilean forest.

00:37:55 Of course, Europe last year was also pretty hot.

00:37:58 So it happens everywhere.

00:38:02 There are always surprises.

00:38:03 10th of December, I was reading dramatic articles about the state of the Australian fire season

00:38:09 to come.

00:38:11 And within the month, we have more rain than we know what to do with down there.

00:38:15 And there are a couple of weather reports from a couple of days ago.

00:38:20 So the interesting thing about that is it's all influenced by weather system in the southern

00:38:25 hemisphere that I actually hadn't heard of.

00:38:27 And in preparation for this, I didn't dig out the name of it.

00:38:31 But as you know, the world is interconnected.

00:38:33 So where the systems all over the world affect other weather systems.

00:38:37 And we're all probably aware of the North Atlantic Oscillation or the MGO directing

00:38:44 the monsoon and so on.

00:38:45 And there's another one I wasn't aware of that that increases rainfall over over Australia.

00:38:52 What is the pattern?

00:38:53 This is the key.

00:38:54 This is what I really want people to take on board.

00:38:57 And we saw an excellent example just a few minutes ago.

00:39:02 Here's a 40 year history of losses in Australia, Victoria, a very well managed plantation.

00:39:15 This 40 year slide is covered in averages.

00:39:22 One of the bees in my bonnet is everybody talks to me about averages and it's all totally

00:39:27 meaningless.

00:39:28 So you can see the first 20 years up to 2000, pretty low incidence of loss.

00:39:34 There's an average there and the average we're using is the area of forestry damage over

00:39:41 the area exposed.

00:39:43 So point two one percent.

00:39:45 And for the last 20 years, that average has gone up 10 times to one point one nine percent

00:39:50 for this particular example, not over the whole country for this particular example.

00:39:55 And what's it saying to us?

00:39:57 It's saying that a things are changing and B, there are extreme events.

00:40:02 These are the wildcards.

00:40:04 These are the events that we cannot predict in either frequency or severity.

00:40:10 And to me, they're the things that, of course, hit us as insurers, but also investors and

00:40:17 forest management, forest managers.

00:40:19 And we need somehow to recognise these, that they do exist.

00:40:22 And we have to incorporate them into our predictions of returns.

00:40:28 Looking at wind many years ago now, we modelled with the help of JLTV, which is now part of

00:40:33 something else, hurricanes across a portfolio in the USA.

00:40:38 The results of those losses, you can see on the right, the green columns and 8086, I had

00:40:45 a seven point eight percent loss.

00:40:48 The dramatic realisation from this analysis was actually in 8086, four hurricanes hit

00:40:57 the same portfolio on the map of those tracks and the portfolios shown on the left.

00:41:05 The other thing we noticed from that is we have clusters of wind events and also gaps

00:41:13 between the major events.

00:41:15 So lesson one, two and three today is there you go, 15 to 20 year gaps between events.

00:41:21 We see this in the far west as well.

00:41:29 Forests are a sea of windstorms.

00:41:31 It's not just the Atlantic, it's also Europe.

00:41:36 Look at that chart there on the left.

00:41:39 Imagine that huge Italian storm did immense damage, northern Italy, and on the right,

00:41:46 you've got a long term pattern.

00:41:47 And again, you're looking at 10 to 15 years between major events.

00:41:51 And right at the end there, we had storm Arwen that did masses of damage in the UK.

00:41:57 Pacific, same with typhoons, an increasing number of typhoons.

00:42:05 And as Swiss Re have told us that a one degree rise in sea surface temperature, it doesn't

00:42:12 sound much, does it?

00:42:13 But of course, to get a one degree rise, it takes a long time.

00:42:16 However, that increases your wind speed and it can add 50% to the damage potential from

00:42:21 where it's in.

00:42:24 So these are the things that all need to be considered.

00:42:29 These are examples since 1984 and shows exactly what I mean.

00:42:38 A couple of major events in that series is the thing that threatens the viability of

00:42:46 a forest investment.

00:42:51 It's not all climate.

00:42:53 And the point at the bottom I make is that catastrophes in the forest are usually a combination

00:43:00 of, for me, it's often four events.

00:43:03 And I call it the improbable coincidence of the improbable.

00:43:07 In other words, everything that happens is highly, highly unlikely, but it's just not

00:43:11 one thing.

00:43:13 It's often four things.

00:43:14 And I'm reminded of a South African case where a fire started.

00:43:18 We were told in the morning that it would be out by tea time.

00:43:23 Tea time came and several things happened that made it so much worse.

00:43:30 The first was the wind boxed the compass.

00:43:33 In other words, it changed its direction, went right round through 365 degrees, pushing

00:43:38 the fire in all directions.

00:43:39 Secondly, the temperature went up.

00:43:41 I forget the details, but possibly low 40s centigrade, it suddenly shot up.

00:43:47 And thirdly, we had the beginnings of spontaneous combustion on the forest floor.

00:43:54 First time I'd seen it, the forest manager videoed this and I thought he must be starting

00:43:58 them.

00:43:59 But no, it was spontaneous combustion.

00:44:01 And fourthly, the final nail in the coffin for the insurers was that local law prevented

00:44:09 aircraft from taking off at night and fighting the fire.

00:44:12 So there we have a fire, pretty normal fire, but out of control due to several other things,

00:44:18 each one of which was highly improbable.

00:44:22 So this is what as managers and insurers we need to consider.

00:44:31 Reducing insurance costs.

00:44:32 OK, this is the last part of the presentation.

00:44:37 I've used here an example of quite a large investment, but the principles apply absolutely

00:44:44 across the investment range.

00:44:48 And each one, of course, would have a relatively similar solution.

00:44:52 So as we were told a few moments ago that 90% of forest owners and investors self-insure.

00:45:00 Why is that?

00:45:02 Because insurance can reduce your exposure to peak losses and it stabilizes returns to

00:45:07 investors.

00:45:10 Why is it?

00:45:11 Well, I would say largely, certainly outside of Europe, Australia, New Zealand, Latin America,

00:45:18 largely people do not know you can actually insure forests.

00:45:20 I spoke to somebody only a few hours ago that wasn't aware that this was possible.

00:45:25 So ignorance is the biggest barrier to expanding this business.

00:45:33 It seems expensive, but people don't really question themselves as to what that is, because

00:45:37 they are actually incurring costs by retaining, paying themselves their own losses.

00:45:45 So what are your losses?

00:45:47 What do they look like?

00:45:48 And what losses can you retain yourself before you need your insurance?

00:45:57 As I highlight there, the obvious thing to do now, and it's so easy and it's so quick,

00:46:05 is certainly for FHIR, is to model your loss profile.

00:46:08 It can be done independently of your particular location, but it can be done for your location.

00:46:15 And in the last five years, the availability of geospatial or space data is getting better

00:46:21 and better and cheaper and cheaper.

00:46:23 And what used to take us several days for large accounts, we can now do in an hour or

00:46:32 possibly less if it's a small one.

00:46:34 So I would just say that if anybody listening is in the forestry management or investment

00:46:40 business, we would be very happy to look at any locations they have and provide a loss

00:46:49 profile for the last 20 years or based on the last 10 years and the predictions of how

00:46:53 bad losses can be.

00:46:54 And that's the first part of you understanding what, how bad it can be and what your exposure

00:47:01 is.

00:47:02 The chart on the right is distributions in wildfires, actually in Australia.

00:47:08 You can see towards the right of that chart that with satellite data now, we have much

00:47:12 more definition of what's happening from year to year.

00:47:15 Whereas in early years, there were gaps until we had annual reports.

00:47:19 So that's technology right there, just showing you what happens.

00:47:25 Notice once again, the gaps between the peak losses.

00:47:28 It is, it's a very simple interpretation of the world around us every 10, 15, possibly

00:47:35 20 years.

00:47:36 In the example we saw for France, by the way, I don't know if you noticed, but it was still

00:47:40 a 13 to 20 gap between major losses for French fire.

00:47:45 But if you look to the left of that chart we were showing, they were reducing to nine

00:47:50 and very much less than that.

00:47:52 So a whole number of explanations for that, but it is a universal truth, really.

00:48:00 This is a pattern.

00:48:01 You will not avoid a loss at some point that surprises you.

00:48:07 So if we're modeling losses, I will make this straightforward.

00:48:12 On the left, you have claim severity.

00:48:14 You have these percentages I've been talking about.

00:48:16 The area of your forest affected by fire for each year.

00:48:20 And now we have a, whatever, a 21 year series.

00:48:24 That is modeled fairly quickly, Monte Carlo simulation.

00:48:28 We get a distribution on the right.

00:48:30 And for us, we look at a one in 250 event as a worst case.

00:48:36 Personally, and I'm sure the others will probably agree, this sort of one in 250 is probably

00:48:41 underplaying how bad it can be under present conditions.

00:48:44 But let's continue with that standard.

00:48:47 So this is the sort of thing we can provide to an owner or investor.

00:48:52 What is the pattern of losses to be expected based on what has happened in the last 10

00:48:57 years or so in that location?

00:49:01 Then certainly if you're a professional investor, you are putting up expected rates of return

00:49:11 on equity.

00:49:12 And I've put a green line in there at 6% of a nominal 100 million investment.

00:49:19 So that's your expected return, maybe typical of perhaps the US and so on.

00:49:25 Along the bottom, I've got a plot of what along the red line, I've got the average,

00:49:30 which is 1.29%.

00:49:32 That is for this particular case, 1.29% is the average loss per year.

00:49:39 And the blue line is the modeled loss pattern.

00:49:43 So the most frequent losses are obviously the small ones.

00:49:45 Those that don't really matter.

00:49:47 You can see the table on the left.

00:49:50 Investing as we go to the right, to the less frequent losses of up to 7% for the 1 in 250

00:49:59 or 12, 13% for the 1 in 10,000 event.

00:50:03 And my question to those proposing investment in forestry is how do you incorporate, how

00:50:11 do you account for the probability of major losses in your expected returns?

00:50:17 And that has to be part of your due diligence, your responsibility to investors to be open

00:50:23 and honest and as accurate as you can as to what is coming up.

00:50:27 You'd expect 6% and we know a lot of these expected losses are well below that, but there's

00:50:32 a whole bunch of them way above 6%.

00:50:37 And that needs to be accounted for in the long-term expected return on investments.

00:50:43 So that I think has set quite a few investment managers thinking about how to do this in

00:50:51 an open and transparent way.

00:50:53 But the key is it doesn't matter who you are, small or big, analyze your loss portfolio,

00:50:58 certainly for fire because that's one of the two catastrophic causes of loss in forestry.

00:51:05 And finally, how do we reduce the cost of premiums?

00:51:11 We look at our loss pattern.

00:51:12 Again, a little example from that Australian case I showed you.

00:51:17 And again, this will vary by where you are in the world.

00:51:21 So the average losses could be a lot lower than this, but you'll still have this pattern

00:51:25 of small, zero, normal losses, and then occasional big one.

00:51:31 So don't insure the whole thing is often the case.

00:51:36 Retain as much risk in our household or car policies.

00:51:40 We retain a deductible or excess.

00:51:43 You can do the same in forestry.

00:51:44 You can retain that loss that should it occur, you'll survive.

00:51:50 You'll manage to continue in that forest.

00:51:52 So for a big Australian one, it might be 1% or 2%.

00:51:56 If you're going to be in the UK, it could be very much smaller than that because fires

00:52:01 isn't a big thing for us here, but it is a big thing in many other parts of the world.

00:52:06 So retain as much loss as you can.

00:52:08 Don't pay for that for insurance.

00:52:11 If you really want to save money, possibly just do all losses above your level where

00:52:18 you cannot survive that loss, the extreme event or that tall red column.

00:52:27 What level of that do you wish to have the insurers cover?

00:52:33 So this is the discussion we would need to have as investors or managers of forest to

00:52:41 decide what risk we can bear, what risk we can retain ourselves and not spend insurance

00:52:46 on and that risk that we really do need to pay for protection.

00:52:52 And it is the extreme event that of course is the main thing.

00:52:56 And I end with a summary.

00:52:58 We all know about the warming climates and the increasing volatility or variability of

00:53:03 losses.

00:53:04 We've got that 10 to 15 year gap between events, whether it's fire or wind, that's going to

00:53:10 happen.

00:53:11 We have quite a wind issue in Ireland and the UK here, but certainly the US and other

00:53:18 parts of the world have a reasonable wind exposure.

00:53:26 Insurance can add value to a business by removing the peaks of your losses.

00:53:32 Do model your risk and we can help with that.

00:53:35 It's not a complicated process now, so just pick up the phone or whatever and it can be

00:53:40 done.

00:53:42 And for cheaper insurance, retain your average losses and reduce your insured limit to your

00:53:48 peak.

00:53:49 Now this is, I put 10% because I'm thinking of large portfolios, but obviously if you're

00:53:53 a small grower with a few hundred hectares, then you would insure the whole lot.

00:53:56 But if you've got tens of thousands of hectares, no 10% for a portfolio is about the maximum

00:54:02 we're getting for a fire event.

00:54:05 There's a hostage to for you, a fortune right there, 10%.

00:54:10 And what does it cost?

00:54:12 Well, I just looked at our accounts recently and I think our average on the total value

00:54:20 of forest, however big it is or small, it's 0.8% of that value.

00:54:25 Very much less for large operations.

00:54:29 So thank you very much.

00:54:31 I was really interested in what was presented before and I know I will be with Peter who

00:54:37 will be following me.

00:54:39 Thank you very much.

00:54:41 Thank you very much, Phil.

00:54:43 It's very interesting to see how consistent are your statement with the one from Guillaume.

00:54:49 That's pretty true.

00:54:50 Just to let you know, I think that in the Groupama, you never insure the whole asset.

00:54:58 You always insure a lump sum or when you say do not insure the total value, I don't think

00:55:09 there is any case in forest where we insure the whole growing stock.

00:55:14 No.

00:55:15 Is that a question for me?

00:55:19 Yes, you can answer.

00:55:20 Phil can comment.

00:55:21 Yeah, Groupama's experience on this is that you're right.

00:55:25 And also because when there is wind or fire, there is a remaining value to the damaged

00:55:31 wood very often.

00:55:32 So people are not left with nothing.

00:55:35 So you would insure only partly for that reason.

00:55:38 And also as Phil commented, the full coverage would be suited for small properties.

00:55:45 But if you are by yourself well diversified with big volume of vectors, then you can effectively

00:55:52 adjust and tailor your cover by adapting the percentage of coverage, which is a very good

00:56:00 idea to reduce the cost.

00:56:02 So I concur.

00:56:03 Phil, you wanted to add a comment?

00:56:06 No, I agree.

00:56:08 We're all seeing from the same hymn book that the issue, the barrier is, as we said, ignorance

00:56:13 that you can do this, but also it's always a discussion with whoever wants to insure

00:56:20 is tailored to them and their situation.

00:56:23 But it's pretty straightforward.

00:56:25 And we find that forest managers and investors have no problem with this concept of realizing

00:56:30 that the whole thing will not burn or blow down.

00:56:33 I mean, even in hurricanes, in our experience, those portfolios have been hit.

00:56:40 It's been under 5%.

00:56:41 But of course, they are large portfolios.

00:56:44 That's the point.

00:56:45 You know, the hundreds of millions of dollars.

00:56:47 But if you're a small grower in Georgia, you know, they all got splattered by Hurricane

00:56:52 Michael.

00:56:53 So their entire trees were shredded.

00:56:57 And then, if you like, their future pension, which is what it represented, was destroyed.

00:57:02 So that's a case in point where small growers really need to switch on to the fact that

00:57:07 they are at risk now more than ever before.

00:57:12 I asked the attendees if there is any question I'm looking for.

00:57:18 And that someone wants to raise a point or make a question.

00:57:25 Don't be shy, you know.

00:57:26 I think there's a question in writing from Chris.

00:57:32 OK, let me see.

00:57:34 Chris, you can ask it directly.

00:57:36 I don't see it in the chat.

00:57:39 Why don't you?

00:57:40 But Chris, yes, please take the floor.

00:57:44 Take the floor.

00:57:46 Make your question.

00:57:51 Can you grant him, Suzanne?

00:57:53 It looks like you cannot speak.

00:57:56 I don't see the question in the chat, actually.

00:57:58 I don't know where they are.

00:58:01 The question from Chris is many events are regional.

00:58:04 Do you encourage investors to spread risk by owning in more than one region?

00:58:09 OK, so perhaps it's a question for Phil.

00:58:17 Well, it's very, you know, it's all interesting, isn't it?

00:58:21 So it's silly for me to say it's very interesting.

00:58:23 But you can do that.

00:58:26 But, you know, as your portfolio gets bigger and bigger, if you're hit by fire in one part

00:58:31 of the world, you'll be hit by wind somewhere else.

00:58:35 So of course, you get spread.

00:58:38 I think the secret to reducing exposure is probably to have smaller locations and many

00:58:43 of them.

00:58:44 But if I look at our own portfolio, you know, we we have a loss profile which is not dissimilar

00:58:51 to some of those forestry charts.

00:58:54 It would make sense, wouldn't it?

00:58:55 Because we're insuring forestry.

00:58:56 So, you know, we we've slipped up in some years and taken big losses.

00:59:02 Hopefully we think we've learned all our lessons.

00:59:05 And as as that question suggests, the diversification of the portfolio is a key thing in keeping

00:59:13 the results for insurer or an investor to a stable level.

00:59:18 However, if you have a large lump of a port of exposure of a certain location, you are

00:59:25 exposed to that location's risk.

00:59:27 So this is why I say do a risk profile for all your locations.

00:59:32 You don't do them.

00:59:33 You do a lot together, but much better to do them one by one.

00:59:38 OK.

00:59:41 I don't see any more hands up.

00:59:43 For some reason, I don't see what the whole chat.

00:59:47 I see some chat, but not all of them.

00:59:51 So thank you very much, Phil.

00:59:54 Now I'll give the floor to Peter Welten from the Swiss Reinsurance Company.

00:59:59 So he will give us the current forestry insurance market from the reinsurance perspective.

01:00:06 So this is even a broader view.

01:00:11 So Peter, I give you the floor.

01:00:14 Yeah, thank you very much, Christophe.

01:00:18 Do you see the slide and do you hear me?

01:00:21 We can hear you perfectly, but we don't see the slide.

01:00:24 We just see the top of the PowerPoint.

01:00:33 OK, now it's OK.

01:00:34 It's working.

01:00:35 Perfect.

01:00:36 You should see it actually.

01:00:37 Very good.

01:00:38 Good.

01:00:39 So thanks, everybody.

01:00:40 So last but not least, so Peter Welten, my name.

01:00:43 I'm from Swiss Re, a reinsurance company, one of the biggest ones here we have.

01:00:49 And I'm within the company for the last 24 years.

01:00:59 So quickly about Swiss Re.

01:01:03 So what is or who is Swiss Re?

01:01:08 I think the last question nicely hands over.

01:01:10 What is a reinsurance company?

01:01:12 A reinsurance company can actually reinsure the direct insurance company like a Groupama

01:01:17 could be a potential client of us, or also a forestry could be a potential client of

01:01:23 us.

01:01:24 And why can reinsurer insure the risk where the direct insurance maybe is limited?

01:01:29 Because we have this global view, whereas a local insurance company is maybe, as we

01:01:34 said, very domiciled, very locally and can be hit, of course, by a big event and maybe

01:01:41 lacks the diversification.

01:01:44 A reinsurer is thinking globally and is hoping that maybe not an earthquake in Southeast

01:01:51 Asia is hitting at the same time than a hurricane or a big fire.

01:01:56 So this is why a reinsurance company is globally spread and diversification is really in our

01:02:01 DNA.

01:02:03 So you see, we are in roughly 30 countries present.

01:02:07 We have like between 13 to 15,000 employees.

01:02:11 Most of the people are sitting in the EMEA region, but also one third in Americas and

01:02:16 one third in APEC.

01:02:19 And you can also see the local presence here.

01:02:24 Quickly about the financials.

01:02:25 So we just tried, as I said, around 44 billion of premium volume.

01:02:33 You see, also we have a corporate solution, direct business.

01:02:37 We have property and casualty.

01:02:39 We have life and health.

01:02:40 For those really interested, please look at the figures on our annual report and the annual

01:02:45 report for 2023 is soon to come out.

01:02:51 So I am sitting actually in the agriculture team of Swiss Re.

01:02:54 So yes, Swiss Re, we have a dedicated team of agriculture people and specialists.

01:03:00 We are roughly 30 persons or 30 colleagues in the agriculture team.

01:03:06 And we are based in Zurich, in Brazil, in Mexico, in Singapore, India, and also in China,

01:03:14 Beijing.

01:03:15 And what is or what are we doing as agriculture engineers and specialists?

01:03:21 In which lines are we present?

01:03:23 So of course, we do the crop insurance.

01:03:28 Why is it now going so fast?

01:03:31 So we do the crop insurance.

01:03:33 Mainly wheat, barley, maize, all arable crops, but also fruit trees against hail, against

01:03:40 storm, against flood, but also like droughts.

01:03:44 We do livestock, cattle.

01:03:46 We do bloodstock, the horses.

01:03:49 Recently also the pets insurance.

01:03:51 So our four leg friends, the dogs and the cats have seen a heavily push in insurance

01:03:57 and in re-insurance.

01:03:58 We do greenhouses, aquaculture, so the fish farms.

01:04:02 And last but not least, we are also doing forestry.

01:04:07 Just when you're quite aware about this FAO and the global statistics of forestry, I just

01:04:12 want to quickly highlight very globally, we have roughly like 4 billion of hectares of

01:04:17 forest covering one third of the whole world, of the whole globe.

01:04:24 Only 7% is actually what we say is planted forest.

01:04:28 And 93% is what we call natural grown forest, primary forest, or also modified natural forest.

01:04:36 So what I'm talking about or what we have talking about is relatively little.

01:04:40 It's only 7% of the total surface where we really call it, it's a planted forest.

01:04:46 And maybe I pay your attention here on this one.

01:04:49 This is the global forest area.

01:04:54 The net change, so actually each year we are losing more or less 5 million of hectares

01:05:00 of forest.

01:05:01 And we are talking about insurance and re-insurance.

01:05:04 And I think that's very nice.

01:05:05 I want to just to give widen a bit of the perspective and say, if we are able to also

01:05:12 avoid this massive deforestation of like 5 million hectares per year, that of course

01:05:18 would also help.

01:05:19 And it would make a big difference also in carbon capturing.

01:05:23 And it would of course be a positive thing.

01:05:27 I know it's not maybe very sexy, but I think just worthwhile to mention.

01:05:33 So from the 7% planted forest, this is roughly 300 million of hectares.

01:05:40 The very productive forest plantation, right?

01:05:43 So an intensively managed planted forest, you typically here see a picture, right?

01:05:49 It has one or two species.

01:05:51 It was mentioned before it could be Pinus radiata, it could be Eucalyptus.

01:05:59 These are roughly half of this planted forest.

01:06:02 So in the end, what we are talking about is maybe a 3% of the global forest area where

01:06:08 I feel the current standing timber insurance policies really make sense and could be applicable

01:06:16 to this forest.

01:06:19 This is somewhere strange.

01:06:26 It's so going fast.

01:06:28 So and this planted players right in the forest, you can see here the biggest countries, China

01:06:35 by far is the biggest country in this plantation areas.

01:06:38 But of course, we also see the typical, the US, the Canada, the Sweden, Russia, India.

01:06:45 So this was a very nice question from India.

01:06:48 And you see there is a lot of plantation there, South Africa, Chile, France.

01:06:54 So these are the typical countries with a lot of planted forest.

01:07:01 And why is now insurance or reinsurance from the perspective of Swiss refocusing of this

01:07:07 planted forest of this 3% as I mentioned before, roughly 130 million hectares.

01:07:16 It's about when we ask questions and if we want to insure or reinsure, we need to focus

01:07:23 on somebody who has really kind of a monetary interest.

01:07:27 There is an interest behind the plantation.

01:07:29 You have a manager, you have a written management plan.

01:07:32 And if we've like ask questions, what is the rotation?

01:07:36 What is your planting costs?

01:07:38 What is your rotation period?

01:07:40 What is your cell culture measurements?

01:07:42 What are the harvesting costs?

01:07:44 And in the end, what is the sales price you can ask that you can get?

01:07:49 You get decent and comprehensive answers from those forest owner really having a professionally

01:07:55 managed plantation.

01:07:56 This picture actually is from the biggest forest owner in Sweden, the company called

01:08:02 Svias Kuk.

01:08:06 And Yomo mentioned there is relatively little insurance penetration.

01:08:11 And I think this is also what we see globally.

01:08:14 So the biggest insurance premium contributors are really coming here from areas like China.

01:08:20 It's coming from the US, Canada.

01:08:23 It's a bit in Europe, the Scandinavian countries.

01:08:26 And of course, it's also a bit Australia, New Zealand.

01:08:29 But of course, yeah, it has quite fast diminished.

01:08:33 Nevertheless, we still, this is a Swiss re-estimate.

01:08:36 We think that maybe a global premium is maybe around 950 million, 970 million of US dollar.

01:08:44 And here, and again, I just kind of opened this very clearly or state this very clearly.

01:08:52 It's the source of Swiss re-estimate.

01:08:53 So this is our estimates.

01:08:55 What you see here, like the 15 biggest contributor of insurance premium.

01:09:00 And by far, China is kind of outnumbering this number, right?

01:09:04 So they're doing like more than 700 million according to our estimates.

01:09:09 Followed by the US, Scandinavian, like Sweden, Finland, Chile, South Africa, with a lot of

01:09:14 plantations, Australia, France, New Zealand, and then a couple of countries below there.

01:09:21 So these are for us the biggest contributor.

01:09:23 And I think this is where really most of the insurance and reinsurance activity currently

01:09:27 is ongoing.

01:09:28 China, I think, just maybe that's also worthwhile to mention.

01:09:33 For me, at the moment, according to my knowledge, at least one of the only country which is

01:09:39 actively subsidizing forestry insurance with up to 50% of governmental subsidized.

01:09:47 So if a farmer, if a forest want to insure, he gets subsidized from the government.

01:09:54 Something which currently I think also in France is maybe a bit of disgust and in other

01:09:59 countries, but so far we haven't really seen.

01:10:03 And this is very much in different than in the crop insurance where all the crop insurance

01:10:08 schemes around the world are often heavily subsidized.

01:10:12 In forestry, we really don't see that much of premium subsidized.

01:10:18 I don't say it's a precondition that forestry insurance and reinsurance marks work, but

01:10:23 subsidized for sure helps to stimulate this market.

01:10:29 And then what we see, a forest owner, I think, has a very unique risk.

01:10:33 It has a very long rotation period.

01:10:37 With wheat or barley maize, you plant, right?

01:10:40 And then like seven or eight months afterwards, you harvest.

01:10:43 With forestry, you plant the trees.

01:10:46 And depending, of course, a bit on the purpose, if you have a very short rotation plantation,

01:10:53 mainly with biomass production, you're maybe up to six, seven, eight years.

01:10:57 If you do eucalyptus, you're maybe up to 20 years.

01:11:00 And with Pinus radiata, we may be up to 30, 35 years.

01:11:05 And here in Europe or in France, if you have the oaks, for example, you have trees easily

01:11:11 up to maybe 200 years of rotation.

01:11:14 And of course, during that period, it's a very long period you're at risk.

01:11:19 And of course, here you see the different risk categories.

01:11:22 You can have natural hazards, but of course, you can also have pest diseases, fungi, animals,

01:11:27 insects.

01:11:28 The market can turn sour.

01:11:29 Timber prices could be very volatile.

01:11:32 Your input costs could actually change or increase, as we have seen now over the last

01:11:37 two years, right, with inflation, land values, but also the country risk, regulatory framework,

01:11:43 political risk, taxes, currency, that all could change.

01:11:47 And what is insurance doing at the moment and insurance and reinsurance?

01:11:52 We're only in brackets.

01:11:54 We are carving out and we're really providing coverage for the natural hazards, mainly flexa.

01:12:00 This means fire coverage due to lightning, explosions, aircraft and windstorm.

01:12:06 We see also like in France, there was frost, snow, hail, like ice, snow, flood, typical

01:12:11 or maybe hail, earthquake.

01:12:13 So this is what typically is covered and all the rest is typically excluded.

01:12:19 When we are now doing a bit of underwriting, and just we don't want to go into the details

01:12:25 very much, but I just give you some of the questions we are asking when we look at the

01:12:30 forestry risk.

01:12:31 And of course, we need to know the risk description, what species cover, what ages, what is the

01:12:37 rotation period, the sum insured, the probable maximum loss, so the PML.

01:12:44 And as Phil nicely have handed out, this could be something maybe between five to 10 percent

01:12:48 of the whole sum insured.

01:12:51 We need to know what are the cover perils.

01:12:53 Often there are extensions covered, so for firefighting costs, for example, removal costs,

01:13:00 increased harvesting costs.

01:13:02 It's very important to know is also liability covered or not, or is the harvested timber

01:13:09 which remains in the forest, is that covered or not?

01:13:13 And especially also, as Phil has mentioned, if fire is covered, it's super important for

01:13:18 us to know what are the firefighting preventions, because we all know that 90, 95 percent of

01:13:26 the fires, they start with a human causation.

01:13:30 It's not like wind, which is really a typically insurable risk.

01:13:34 It happens sudden, accidentally.

01:13:36 You cannot actually very much influence the impact of a huge windstorm.

01:13:42 But with fire, it's a completely different story.

01:13:44 Depending if you are able to attack the fire fast, if you have firefighting management

01:13:51 into control, fuel load management control, that's super important to know.

01:13:56 The valuation of timber, of course, is super important to know.

01:13:59 Is it net present value or is it a cost approach or the realization values?

01:14:04 And here we also have seen that the value can actually grow super fast.

01:14:09 One plantation, 20,000 hectares, each hectare maybe 4,000 euros of values.

01:14:16 You almost have like 100 million of some insured.

01:14:20 And at the moment, no reinsurance or insurance company will actually give you like 100 million

01:14:25 of capacity.

01:14:26 Therefore, this is what my two processor have or kind of speakers have already told you.

01:14:32 We have like first loss limits or we have limited some insured, which are then really

01:14:37 kind of covered.

01:14:38 So salvage situation.

01:14:41 This is what my two presenters before also have talked.

01:14:47 Even after a fire or a windstorm hits the forest, there is still a value worth right

01:14:54 after the event.

01:14:55 So it's not that the forest or the timber is completely worthless.

01:15:01 There is an agreed value still in place, maybe not for the initial purpose, but there is

01:15:07 a salvage value there.

01:15:10 Then of course, we do this pricing, we do the loss history, we can do exposure, vulnerability

01:15:15 curves.

01:15:16 We see what is the limits, the first loss limits, and we come up with a price for it.

01:15:20 We need, of course, insurance company, a local insurance company.

01:15:24 So Swiss Re cannot act on our own behalf, but we need a local insurance company regulated

01:15:30 by the local government and regulations.

01:15:33 And then we can actually provide on their behalf.

01:15:36 And something like what is often missing now, I just refer to the questions from India.

01:15:42 Even if Swiss Re would like to do the business, but if there is no local insurance company

01:15:46 in India, which have dedicated underwriters who have a policy wording in place, who know

01:15:52 exactly how to do the underwriting, how to take risk selection, how to apply first loss

01:15:58 limits, how to calculate the premium, how to do loss adjustment, then it's super difficult

01:16:03 or almost impossible for Swiss Re to provide reinsurance coverage because we are really

01:16:09 dependent that we have a local insurance company who knows how to do the business.

01:16:15 That's often a hindering stone.

01:16:17 We don't have a local partner maybe.

01:16:20 And so therefore, certain countries are, even though they have a lot of maybe potential,

01:16:26 but we see relatively little insurance penetration.

01:16:31 The reinsurance structure is of course super important.

01:16:33 And then there is relatively a big risk of reputational risk.

01:16:37 This ESG check, this is actually important for Swiss Re.

01:16:43 I know it's not the best thing that we rely on the certificates like an FSC or a PFC,

01:16:51 but at the moment we have no better solution than to say, look, this plantation, we are

01:16:58 going to reinsure if they have an FSC or a PFC label in Malaysia, Indonesia, and there

01:17:04 is also for the Palmoim, the RISPO, the Roundtable on Sustainable Palmoid, like in Indonesia.

01:17:11 These certificates are for us a precondition.

01:17:13 If we don't, if those plantations are not certified, it's going to be extremely difficult

01:17:18 for us on the reinsurance side to accept such a risk.

01:17:23 It just helps us that we are not involved in clear cutting or illegal logging, illegal

01:17:28 use of fire or that World Heritage site or tropical rainforests are actually illegally

01:17:35 kind of harvested and we don't want really support such kind of operations.

01:17:40 That's clear.

01:17:43 The recent market, I think, in reinsurance, if you have listened to Phil, right, then

01:17:47 he tells you about the big losses and every 10 or 15 years you have to see, or do you

01:17:52 have to expect a super big loss?

01:17:55 We have seen, of course, that recently with these big fires in Chile, South Africa, Australia,

01:18:00 US, the hurricanes like Ian, Laura, Michael.

01:18:05 And just to say, this Chile, for example, we know that like the insurance, the insured

01:18:10 loss was more like 100 million of US dollar.

01:18:13 And if you lose that amount of money, you have to be super careful because if you lose

01:18:18 such an amount in one year, it needs at least a very long decade to recuperate that you

01:18:25 can actually pay back this loss.

01:18:27 So the volatility is very high in forestry.

01:18:31 We have seen that.

01:18:33 And it has actually resulted in less reinsurance capacity.

01:18:37 Some people have really pulled out of the markets.

01:18:40 I think you more have also mentioned that there is all now from three players in France,

01:18:45 there are only two left.

01:18:47 And there are now offered smaller limits.

01:18:50 You can simply not place larger capacities in the reinsurance market.

01:18:56 We need better data requirements.

01:19:00 We also need higher deductibles, often smaller limits, higher prices.

01:19:05 Often the whole renewal process starts earlier.

01:19:09 And maybe with all this more restrictive coverages and more data requirement, it also maybe helps

01:19:14 to kickstart a bit of digitalization that we get more information, maybe also from remote

01:19:20 sense data sources.

01:19:23 And maybe here the last one.

01:19:25 Currently we see typical insurance or reinsurance is based on indemnity based insurance.

01:19:32 The farmer has occurred a loss.

01:19:35 He notifies the insurance company and then a loss adjuster goes to the field, goes to

01:19:41 the forest.

01:19:42 Of course, he is supported by drones or by aerial pictures and imageries or maybe even

01:19:48 by satellite pictures.

01:19:50 But that's the way insurance is then kind of the losses is calculated on such kind of

01:19:56 calculation scheme and then the indemnification is paid.

01:20:00 In the past, we have seen also some firefighting costs coverages, mainly in Canada, Manitoba,

01:20:05 Ontario, where you specifically cover the costs of the helicopters and the aerial aircrafts.

01:20:12 It actually didn't turn out very well for insurance or reinsurance, I have to say.

01:20:17 And we see lately also a bit of an index based approach for fire and storm or like for storm,

01:20:23 mainly this cat in the box models where you don't send out any loss adjusters anymore

01:20:29 to the field, but you based on an index and an index value, the indemnification is based.

01:20:35 And maybe a bit of an outlook, right, these three bullet points below here about the forest

01:20:40 carbon sequestration, the carbon credits.

01:20:43 This is something currently discussed.

01:20:47 Also Swiss Re is involved.

01:20:49 However, we really have not seen major transaction coming from this.

01:20:55 ILS, so this insurance linked securities could also be maybe something to think about, right,

01:21:01 the cat bond, but certainly until now we have seen, even though there is appetite from the

01:21:06 capital market, but the volumes and the rate on lines involved are simply too small.

01:21:13 And lately, I would say people are talking about also, can we do something about ecosystem

01:21:17 services, biodiversity, climate adaptation?

01:21:23 Also here, we are up into discussion.

01:21:27 Biodiversity plays a vital role, right, in all these elements.

01:21:31 What we currently are missing is a bit the link between what do you allocate as a value

01:21:35 or as an insured value on such type of coverages.

01:21:40 So also here, I have to say, maybe that's a bit future music at the moment.

01:21:45 We don't have really any kind of disclosed transaction here or realized transaction in

01:21:51 this respect.

01:21:53 And last but not least, it has been a while, but I have published within Swiss Re this

01:21:58 forestry publication.

01:22:00 So maybe for people in this call who are not familiar at all with insurance or reinsurance,

01:22:06 please visit Swiss Re website or approach me.

01:22:10 I can send you this kind of forestry insurance paper.

01:22:14 I've written a largely untapped potential.

01:22:18 It gives an example for about four or five, six countries a bit the way how insurance

01:22:23 and reinsurance works, what could be covered, what is excluded, where do we see the big

01:22:29 challenges.

01:22:30 To conclude, this was now, let's say, a bit of a global view on forestry.

01:22:34 I think forestry is super important.

01:22:37 However, there is many kind of hindering stones to it.

01:22:41 Pricing is difficult.

01:22:42 No third party vendor models are applicable yet like AIR or RMS.

01:22:50 The penetration is relatively small.

01:22:52 It has small pockets.

01:22:54 It's only a handful or a couple of handful of players, insurance and reinsurers.

01:23:00 And despite the importance of forestry, I have to say in my last 15 years, I don't have

01:23:05 really seen a big push in insurance or reinsurance in this respect.

01:23:10 With that, thank you very much.

01:23:12 I hope I have kept more or less my 20 minutes and open to questions if there are any.

01:23:19 Thank you.

01:23:20 Thank you very much, Peter.

01:23:21 Yeah, we are on time.

01:23:22 We have time for questions.

01:23:24 Actually, we have as much time as people need to make questions.

01:23:28 I just wanted to let you know that we with Groupama, we had a project called FIRE-RES,

01:23:34 an European research project where we tried some index-based insurance scheme to compare

01:23:42 the insurance scheme used at the moment with some index-based reimbursement.

01:23:48 And it sounds quite interesting, but a bit difficult with small orders.

01:23:52 I see there is a question in the chat because now I can see the chat.

01:23:57 So I don't know if we can give the floor, open the microphone for Peter Coleman.

01:24:03 Peter, you had something quite in line with one of the last comments on carbon.

01:24:10 Hi, thank you.

01:24:12 I think it's interesting to hear what's going on as increasingly people are worried about

01:24:21 both the adaptation of forests to future climates and their resilience.

01:24:32 And I think the question might have been answered after I posed it, which was, do you see a

01:24:37 substand a market developing around the risks to forest carbon given there is a parallel

01:24:46 market developing around forest carbon offsets, which I gather some investors lost last year

01:24:56 because in the west of the US, some of the forests burnt had been the carbon was associated

01:25:04 with.

01:25:05 So I guess it's really a question to all three of you.

01:25:11 Well, shall I start?

01:25:14 I think that as Peter suggested, there is a big uptake, uptick, I should say, in inquiries

01:25:23 relating to carbon sequestration and so on.

01:25:29 And I think the I mean, we've been thinking about this for about 20 years, but it's just

01:25:35 beginning to happen.

01:25:36 And at the moment, many of those approaching us are in their first or second year of their

01:25:43 project.

01:25:44 You know, they may have planted trees, they might not, they would just be thinking about

01:25:49 it trying to get a price of insurance for their investors to help them raise the capital

01:25:54 to finish the project.

01:25:55 So there's a definite uptick.

01:25:58 Also, there are new players in in the playground, such as KETA looking at delivery of carbon

01:26:05 that that was announced last year, and they're a team that have been very busy.

01:26:11 There are several other initiatives with people like Houdons and Marsh and so on.

01:26:17 But it's to me, my impression, it's all very, what's the word?

01:26:25 It's emerging.

01:26:26 You know, we were actually working on two or three carbon propositions at the moment.

01:26:31 And Peter's probably doing the same.

01:26:33 I don't know.

01:26:34 But, you know, it's a slow start, but it's beginning to happen.

01:26:38 Yeah, maybe I can, yeah, maybe I can add.

01:26:42 I also think it's in its infancy.

01:26:46 Interesting enough, like 15 years, we really had like a carbon desk.

01:26:51 Maybe we were far ahead of the time.

01:26:53 It was then also the carbon credit was kind of dealt at 20 euros or 20 US dollars.

01:27:00 It then dropped tremendously down to, I think, two US dollars.

01:27:04 And I think that was more or less the end of our carbon desk story then.

01:27:08 Now, in the meantime, as I also feel said, we're working on a couple of elements and

01:27:13 inquiries.

01:27:14 I see two or three currently showstoppers.

01:27:17 First, this principle of permanency.

01:27:20 Difficult, right?

01:27:22 Because in the insurance, reinsurance market, we typically have like one year's contract,

01:27:28 maybe up to two or three years contract.

01:27:31 And if you would have applied this principle of the carbon credit and permanency, and you

01:27:35 would actually do have to deliver the carbon over the next 10 to 20 years, that raises

01:27:41 a bit of questions.

01:27:42 Secondly, I think the whole industry has nowadays, or the last, let's say, year was undergoing

01:27:49 difficult times.

01:27:50 I just want to mention maybe South Pole.

01:27:53 I want to mention maybe the difficulties in baseline of certain REDD projects.

01:28:00 So as I said, in the infancy, probably state, if we got this baseline wrong, and if you

01:28:06 got all for this kind of South Pole accredited people, and maybe we cannot rely at the moment,

01:28:15 or there are weaknesses in the way you actually kind of put your carbon credits, right, to

01:28:23 such projects, then it's also difficult for us on the insurance and reinsurance side to

01:28:29 actually how we should concretely price that.

01:28:31 We had one idea that was more like maybe insurance or reinsurance, the buffer pool.

01:28:37 Maybe you're familiar here with the buffer pool concept, or otherwise, maybe you can

01:28:42 read about it.

01:28:43 But it's the main principle is you have such a wide variety of maybe forests.

01:28:48 And as I said, lack of the big numbers and volatility driven, it's very unlikely that

01:28:54 100% of your credits will disappear.

01:28:58 So you need to have a certain buffer to kind of secure your credits, also for the companies

01:29:03 who have bought them.

01:29:04 And maybe beyond the insurance, reinsurance side can look at this buffer pool.

01:29:08 So just maybe one or two elements or forward looking views how we maybe can tackle it.

01:29:15 Just to complement this, if I may, we have a group created a product which is effectively

01:29:24 helping the project companies put together the polluting companies and the ones providing

01:29:31 carbon credits to secure the production of the trees that they have to produce over five

01:29:38 years in order to benefit from a certain labor, which is also driving tax benefits and recognitions.

01:29:44 So that's where we, you know, we don't insure the carbon credits themselves, but we do participate

01:29:50 in securing the project that provides carbon credit benefits to both parties really.

01:29:57 Yes.

01:29:58 And as you said, for example, if I take the French case, there is a buffer of 10% of the

01:30:04 carbon credit when you buy credit, you assume that you will lose 10% at the national level

01:30:10 due to risk.

01:30:11 So you underestimate what you are really implementing.

01:30:15 Interestingly, also carbon credit came after the fire in 2022, helping to restore forest

01:30:22 as a carbon stock.

01:30:23 So it has been kind of complement with the insurance.

01:30:27 So there's a carbon market start to bring a lot of money in the forest business.

01:30:34 There is just one small comment from this Kaspal asking if you can share the link with

01:30:39 your book, because the book giving example and the advice was quite interesting.

01:30:45 This is one question I have.

01:30:47 It's where there is no national player.

01:30:51 Are you in capacity as a reinsurer to support them when there is an insurance company that

01:30:57 wants to go to forest market and that has no skill or limited skill, for example, in

01:31:02 India or somewhere else?

01:31:03 Are you in capacity to support an insurance to develop a product for foresters or is it

01:31:09 something out of your scope?

01:31:11 Yeah, not difficult one.

01:31:15 It's more like do we have time to do that?

01:31:16 Right.

01:31:17 As you can imagine, there is many projects and we also have a certain priority and maybe

01:31:22 with a certain task also profitability targets.

01:31:25 Principle, yes, I think we have done that.

01:31:28 And often also a reinsurance company like us is maybe doing more of primary work than

01:31:33 maybe reinsurance work.

01:31:35 And with this primary work, I actually mean we give advice, we help, we can maybe help

01:31:40 drafting insurance policy, applying the correct wording and tables, maybe also help on the

01:31:46 pricing side.

01:31:48 But we can never be really domestic.

01:31:51 We are not regulated domestically.

01:31:53 We cannot take the risk selection.

01:31:54 So I think we can guide, we can help, we can principally teach the basic principles and

01:32:03 what we can do.

01:32:05 But in the end, we are not a direct insurance company.

01:32:08 So but we have done that many times.

01:32:10 And then, of course, if we believe in the business case, we can also then once this

01:32:14 is established, we can provide reinsurance capacity on a limited way.

01:32:18 For example, something like a Phil Cottle or the London market, a syndicate actually

01:32:26 is licensed around the world.

01:32:28 So it's often the case a bit, is it nice that the London market is actually kind of

01:32:34 undermining maybe a development, but sometimes they are also helping to create development

01:32:41 maybe in an underdeveloped country.

01:32:42 So needs to be discussed on a case by case basis.

01:32:46 But maybe Phil, I don't know if you have a problem across maybe now India as a concrete

01:32:50 example in the past.

01:32:52 Well, India is very interesting for me because I've flirted, if that's the right word, with

01:32:58 Indian forestry for many, many, many years and nothing seems to get underway.

01:33:06 And I don't know why that is.

01:33:08 I did have the experience of quoting for some Indian business and after about three weeks

01:33:12 got my own quote back saying, could I undercut it?

01:33:15 So I I'm a nice dynamic.

01:33:21 I'm sitting here with open arms.

01:33:23 But yeah, nothing really substantial.

01:33:27 And we did research this.

01:33:29 And when some again some years ago with a friend of mine in Delhi, he he was telling

01:33:34 me most insurance companies have an obligation or they did to insure forests because that

01:33:39 determined I think the amount of property the insurance could do, some sort of ratio

01:33:44 going on.

01:33:45 But despite all that, nobody actually did anything.

01:33:49 So maybe, as you say, Peter, it's a lack of a knowledgeable local insurer that is is the

01:33:56 barrier.

01:33:57 I think all the reinsurance in the world is available.

01:34:01 It's just it's just that local player that seems to be missing.

01:34:04 OK, and the last question, you started your talk reminding the figures of planted forest

01:34:11 in the world with a six, seven percent of planted forest being the kind of key niche

01:34:16 market for the insurances.

01:34:19 You have a clue about how much of these six percent, seven percent are insured at the

01:34:24 moment.

01:34:25 Is it what is the potential for insurance worldwide?

01:34:31 Is it only, you know, 10 percent of the six percent that is insured in France or is it

01:34:37 much more because there is big companies in Chile and so on that are all insured?

01:34:42 You.

01:34:43 Yeah, I guess that the insurance penetration is probably below 10 percent.

01:34:52 That's my guess.

01:34:53 Yeah, I, I've always thought had in my mind a sort of five percent figure, as I said,

01:35:00 you know, there are barriers and the biggest barrier I meet it every week.

01:35:03 Oh, I didn't know you could insure for us.

01:35:06 You know, this this is this is the thing.

01:35:08 And it's often the last call.

01:35:11 Investors do everything else and then they come to insurers.

01:35:15 So I'll tell you what my plan is this year to really try and access investors looking

01:35:22 at ESG requirements net zero because they'll have never been in forestry before.

01:35:27 And and what's the word to advise them that it is possible.

01:35:34 There are there are rigorous methods to help them assess their risk proposition.

01:35:40 And we're here to to do it and to try and have a simple access to the skills that Peter

01:35:47 and Kieloom and ourselves have and others so that we can get the show on the road.

01:35:53 OK, I see there is a hand up from Elena Gores.

01:35:57 So Elena, if you can make your question.

01:36:00 Hello.

01:36:01 Can you hear me?

01:36:04 Yes, it's perfect.

01:36:06 Yes.

01:36:07 OK, thank you.

01:36:08 I really enjoyed all the presentations.

01:36:11 I'm coming from Spain and I had a question.

01:36:14 Well, we have this semi-natural forest, let's say, that are professionally managed, but

01:36:19 not necessarily planted forest always.

01:36:23 And I'm thinking on the issue of the group.

01:36:27 My colleague mentioned that there are several good practices that could reduce the risk.

01:36:33 I can imagine then the losses to be covered.

01:36:37 Have you have you estimated which percentage or until which point this could somehow modulate

01:36:46 the premium so that it could act as an incentive for the forest managers?

01:36:53 Thank you.

01:36:54 Yeah, so a question for me, I guess.

01:36:57 I think it really depends on every property.

01:37:01 It's hard to say, you know, globally what's the room for premium reduction.

01:37:07 But I do believe this is significant.

01:37:09 You know, this is not only a tiny reduction because, of course, it's all about risk assessment.

01:37:16 And you know, we would regard as very much less risky well-managed property.

01:37:23 Today, we don't really differentiate in our contract.

01:37:26 There is no such parameter embedded.

01:37:29 It will arrive.

01:37:31 It will come in soon.

01:37:33 And you know, I think we intend to make it significant to promote good practice, but

01:37:40 also because we reduce the risk significantly, we believe.

01:37:44 So it will be, you know, in the range of between 10 to 20 percent, I think, reduction, you

01:37:50 know, at minimum.

01:37:51 OK, interesting.

01:37:52 So it means that the people that will clean well the forest will have a discount.

01:37:59 Yes, but also it works both ways.

01:38:01 There will also be a penalty for the ones, you know, not managing it well until some

01:38:06 point where you don't even want to insure it.

01:38:09 And that's coming back to the point we made earlier on why such a low penetration of insurance

01:38:15 into the plantation forest.

01:38:16 I think it also very much depends on the profile of the owners, because as Phil commented,

01:38:23 you know, an investor will be more interested into insurance because he will understand

01:38:29 he will think in terms of protecting his assets, whether a private owner which has inherited

01:38:34 his forest, you know, is seeing things differently, sees the cost first.

01:38:39 So it's a different look.

01:38:41 And I think with more investing type of owners in the future, which seems to be the case

01:38:49 with carbon projects and so on, we might also see a natural trend to increase insurance

01:38:54 coverage.

01:38:56 OK.

01:38:58 So I see it exactly the same way, right, as I mentioned before.

01:39:05 The interest, the monetary interest to really have a productive forest plantation into perfect

01:39:11 rotation to serve your markets, you have an interest in it because you have heavily invested

01:39:16 in it.

01:39:17 You have a chainsaw behind and the logging industry and everything like that is for me

01:39:23 almost like a precondition to ask for insurance.

01:39:26 If you get requests, we have a forest, but you ask just very basic questions and you

01:39:31 don't get really sufficient answers about rotation, silviculture, management plan, standard

01:39:38 volume or let's say standing volume, average tree height, rotation period and the likes,

01:39:45 then you could already feel there is probably not a real interest behind.

01:39:49 And as we have heard from you, right, badly managed forest, accumulating fuel load, and

01:39:55 then maybe in a dangerous environment, not applying best management practices.

01:40:01 If then you the spark ignites, such a fire cannot be stopped.

01:40:05 Right.

01:40:06 And I think especially with fire, I encourage to maybe also the participants here to look

01:40:13 what the fire hog system maybe can do, what this kind of 360 degree cameras, fire detection

01:40:21 cameras can do.

01:40:22 I know these are heavy investments and are only for the big plantation owners.

01:40:27 But if you see what Chile or South Africa is doing in this respect, how fast they also

01:40:32 react, right, this initial attack of a fire, which needs to be done within the initial

01:40:38 15, 20, 25 minutes before you lose control of your fire.

01:40:43 There is so much to it, right?

01:40:46 Yeah, I can just kind of say it's super important.

01:40:51 And of course, it also like in Spain, it has to do with the fire, with the local firefighting

01:40:55 management system.

01:40:56 I think they have learned a lot as well as the Portuguese.

01:41:00 It was kind of very centralized like 20 years ago.

01:41:04 And now they have realized we have to go out again into the region.

01:41:07 We have to attack very fast.

01:41:09 We have to make the investments into the firefighting management and equipment.

01:41:14 Also for example, the Scandinavians like the Sweden, they have sold all their firefighting

01:41:20 airplanes until they have realized, OK, the last five, six, seven years, there was one

01:41:25 or two larger fires also in Sweden again.

01:41:28 And so they need to invest again into firefighting equipment.

01:41:31 So I think it's a combination between the firefighting equipment, the pompier, how are

01:41:38 they organized, and as well as the firefighting equipment possibilities, the fire breaks,

01:41:46 the fuel load management, maybe even under canopy fire on a very kind of safe day to

01:41:53 do that and to apply these best practice standards again.

01:41:56 And of course, it does not help that initially we had often like talking now like 100 years

01:42:02 ago, we had some fire, disastrous fires.

01:42:05 Of course, they get rid of all the fuel load after such a fire.

01:42:08 And nowadays, such a fire hardly occur anymore.

01:42:11 So we generally see also in this typically wildland urban interface, a huge accumulation

01:42:18 of property, gas, cars, villas, and it's an explosive mix, right, of this fuel load.

01:42:27 And once this kind of fuel load gets burned, of course, it's clear that also the forests

01:42:32 or the plantations could be affected.

01:42:34 Maybe less in France, but especially in the US, in Australia, that's a super big risk.

01:42:45 Just on this point, a couple of years ago, we paid a claim to a very well established

01:42:50 forest management investment company.

01:42:52 We were very surprised at the nature of the loss and thought that they hadn't really focused

01:42:56 on fire protection.

01:42:58 So as a result of that, we have our own fire management recommendations, which we send

01:43:05 to anybody that wants it.

01:43:06 It's just a checklist of the things you need to think about for fire protection and of

01:43:11 course, adapt it for your environment.

01:43:13 So the same checklist could be used in Chile or in Sweden with different outcomes, but

01:43:20 hopefully just as effective.

01:43:21 >> Could it be used also in Nigeria?

01:43:23 As you can see, there is a question in the chat about Nigeria.

01:43:28 Has any of you already been there or some initiative or plans there?

01:43:32 There's a question how Nigeria could be involved in insurance schemes.

01:43:41 >> I have no information.

01:43:43 Sorry.

01:43:44 >> Okay.

01:43:45 If there is no more questions, I'm checking.

01:43:52 No hands up.

01:43:55 No question in the chat.

01:43:57 So I think it's time to thank you, the three of you, for your time.

01:44:02 If you could share the link with the book you've shown, it could be interesting for

01:44:07 some of the participants.

01:44:08 Peter.

01:44:09 And I would like to give you a great thank, Guillaume, Phil, and Peter.

01:44:17 If there is a need for any follow-up, you can get in touch with IEFC and we will share

01:44:23 the information with the speakers.

01:44:27 I would like to thank you very much.

01:44:29 I think for Planted Forest, this was very relevant.

01:44:32 Very interesting talks.

01:44:34 This talk will be online for IEFC members in the restricted area.

01:44:41 And also the presentations.

01:44:44 And the next seminar will be very different because it will be about mechanization and

01:44:50 robots in Planted Forest for plantations.

01:44:55 I thank you very much.

01:44:56 And I wish you a nice weekend for those who already are on weekend and a nice afternoon

01:45:00 for the others.

01:45:02 And thank you very much for your presentation.

01:45:04 Bye-bye.

01:45:05 Thank you.

01:45:06 Bye-bye.

01:45:07 Thank you, everybody.

01:45:08 Bye.

01:45:09 Bye.

01:45:10 - Bye. - Bye.

01:45:11 Bye.

01:45:11 [BLANK_AUDIO]

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