WINDWARD ISLANDS CROP INSURANCE (1988) LTD. (WINCROP)

1. WINDWARD ISLANDS CROP INSURANCE (1988) LTD.(WINCROP) Presentation By HERNICA FERREIRA

2. WINCROP • CORPORATE INFORMATION • WINCROP’S EXPERIENCES • THE WAY FORWARD

3. CORPORATE INFORMATION Established in:- • Dominica - 1987 • St. Vincent - 1996 • Grenada - 2000 • Incorporated in Dominica in 1988 as a Company limited by shares. • Head Office in Dominica • Branch offices in St. Lucia and St. Vincent

4. MAIN OBJECTIVES OF WINCROP • To carry out the business of Crop Insurance • To secure re-insurance against any and all risks assumed • Provides statutory insurance and optional contractual insurance against loss of banana holdings by windstorm and volcanic eruption.

5. PRECURSOR TO WINCROP • Transitory programs • 1959 – 1969: loss compensation - all islands • 1969 – 1971: Dominica excluded • 1972 – 1979: Dominica (David) • 1974 – 1982: St. Vincent (Emily) • 1974 – 1980: St. Lucia (Allen) • These schemes ultimately failed.

6. Precursor to WINCROP (Cont’d) • Unsuccessful Disaster Funds • 1970 – 1987: Every Island • 1983 – 1989: St. Vincent • 1983 – 1987: St. Lucia • 1987 – 1992: St. Lucia (10% scheme alongside WINCROP)

7. REASONS FOR FAILURES • Lack of separation of insurance funds • Abuse of the system • Low cess, low provision for benefits • Difficulties in obtaining re-insurance • High claims payments • Lack of insurance experience

8. STRUCTURE OF WINCROP • The shareholders are:- Dominica Banana Marketing Corp. - DBMC St. Lucia Banana Corporation - SLBC St. Vincent Banana Growers’ Assn - SVBGA Grenada Banana Coop. Society - GBCS

9. Structure of WINCROP (Cont’d) • Designed as a small farmer organization • Seed Capital contributed by the local BGAs No government contributions to the Share Capital of the Company

10. FUNDING OF WINCROP • Funding among the BGAs was as follows:- $ % DBMC - 887,000 - 26.06 SLBC - 1,481,000 - 43.50 SVBGA - 901,000 - 26.47 GBCS - 135,000 - 3.97 Total 3,404,000 - 100.0 • Contributions were based on 1987 production levels

11. PREMIUM AND BENEFITS • Premium - 2.5 cents per pound in St. Lucia and Dominica • 1.1cents per pound - St. Vincent and Grenada • Benefit rate - 10.0 cents per pound all islands • Deductible - First 20% for each and every loss • Constructive Total Loss - 80% assessed damage

12. WINCROP’S EXPERIENCES

13. Two years after operations started, Hurricane Hugo struck the islands in 1989; • 9,937 Claims received • 8,882 Claims approved for payment • $8.8 million paid in benefits to growers • Dominica - $7.9 M or 89% • St. Lucia - $0.97M or 11%

14. HURRICANEHUGO SEPT 1989 ST. LUCIA

15. RESULTS OF THE HURRICANE HUGO TEST • The handling of a large number of Hugo claims resulted in favourable publicity.

16. LESSONS FROM HUGO • How such a large event was handled by such a young WINCROP? • WINCROP utilized On-Call Assessors (OCAs) to carry out assessments • 80 OCAs in Dominica • 34 OCAs in St. Lucia

17. TROPICAL STORM DEBBIE 1994 • Extensive damage to banana crop • Claims distributed as follows:-

18. VARIOUS STORMS - 1995 • Eleven storm events recorded • 17,144 claims received • 14,905 claims approved for payment • $15.5 million paid in benefits • 4 major events were a tropical wave of 7th July; one tropical storm followed by two hurricanes within a period of 19 days.

19. 1995 CLAIMS

20. CLAIMS MANAGEMENT • Tropical Storm Debbie in 1994 remains the single biggest event in WINCROP’S history with claims of $9.42M. • WINCROP’s best claims experience was in 1995 • 1995 produced highest annual aggregate of claims experienced by WINCROP.

21. CLAIMS MANAGEMENT (Cont’d) • Loss Assessment was a massive exercise requiring the deployment of 204 OCAs on three islands. • Since 1994 and 1995, WINCROP have paid other large storms

22. HURRICANE IVAN - 2004 ST. VINCENT

23. HURRICANE DEAN - 2007 DOMINICA

24. CLAIMS PROCESSED 1987- 2009

25. Claims Processed 1987- 2009 (Cont’d)

26. Claims Processed 1987- 2009 (Cont’d)

27. CLAIMS DISTRIBUTION 1987-2009

28. REINSURANCE • Costly but essential provision • Provides capacity to pay claims in excess of reserves in the event of a major disaster • Stabilizes effect of losses on company’s funds

29. REINSURANCE (CONT’D) • Spreads risk on an international portfolio • Program would be a mere disaster fund without re-insurance

30. REINSURANCE ACCOUNT

31. ON-CALL ASSESSORS (OCAs) • With minimal office staff, WINCROP engages some 200 plus OCAs. • In accordance with established procedures, pre-season loss assessment training courses have been conducted to ensure that all OCAs adhere to standardized damage count procedures for estimating % windstorm damage.

32. ON-CALL ASSESSORS (CONT’D) • Annual training is conducted by permanent Assessors and Adjusters. • OCAs work in pairs • OCAs’ assessments are audited by permanent assessors • OCAs can be terminated at anytime for a number of reasons

33. LOSS ASSESSMENT • Based on estimation of percentage damage to insured bananas in each holding using one of 3 methods. • Purposive random sampling where damage levels are less than 80% 2. Modified full plant count when damage levels are 80% or greater and for small holdings

34. LOSS ASSESSMENT (CONT’D) 3. Area assessments for extensive damages • Provisions are made for the process of arbitration if grower does not accept assessment.

35. DIFFICULTIES OF OPERATIONS • WINCROP has succeeded in its mandate to growers but there have been difficulties • Decreasing grower populations resulting in significantly less premium income for WINCROP

36. Difficulties (Cont’d)

37. Difficulties (Cont’d) • For 9 consecutive years (2001-2009) WINCROP incurred losses on operations due to low premium income in a declining industry. Reasons for decline: • Removal of preferential access to EU markets and international commodity price fluctuations and price wars. • Lack of Government subsidy for growers’ premiums.

38. Difficulties (Cont’d) • The fact that growers themselves have to pay the full premium is a disincentive. An increasing number of growers prefer to sell their bananas on the regional markets where there are less quality concerns • Declining export levels, due to decreasing prices on U.K. markets

39. Difficulties (Cont’d) • 60% of growers not insured in St. Lucia due to absence of legislation • All available literature suggests that full farmer participation is absolutely necessary for small farmer crop insurance programs to succeed • Hence Govt’s role in ensuring that legislation is in place

40. WAY FORWARD FOR WINCROP • Must diversify into other crops and Agri-businesses Regionally. • Need for funding to accommodate diversification thrust. • Need for Government subsidies for premium and grower benefits.

41. POTENTIAL PRODUCTS FOR INSURANCE COVERAGE Aquaculture Farmhouses and Equipment Green Houses Plantains Tree Crops (avocado, cocoa, nutmegs, others) Livestock (poultry, pigs, cattle) Others

42. Way Forward (Cont’d) • WINCROP needs the intervention of agencies willing to support agriculture. • Legislation to ensure full farmer participation • As the only Regional organization with experience and capability in Crop Insurance, WINCROP needs full support of the Governments and Agricultural Businesses.