Growth Potential

Support from Guy Carpenter & Company is allowing a Canadian university to offer a world first: a new professorship in agricultural risk management and insurance at the University of Manitoba’s I.H. Asper School of Business in the Warren Centre for Actuarial Studies and Research. As the first-ever research position of this type within an actuarial framework, the professorship represents a leading-edge opportunity for the agriculture sector in Canada, and internationally.

Agricultural insurance plays a vital role in the stability and growth of the agriculture sector, helping to ensure a more productive and stable food supply for countries around the world. In a global context, having in place a strong agricultural insurance system is critical to meeting the demand to feed the world, and to enhance world food security.

In managing agricultural risks, insurance can help to reduce the negative impacts of natural catastrophes, such as floods or droughts, through effective risk transfer at both producer and government levels, expedite recovery, enable investment by reducing fluctuations in investment returns, improve access to credit, and reduce government liability in financing post-disaster reconstruction, which can often be more costly to government than a well-functioning insurance program.

As agricultural risks have become more complex, actuarial foundations have become increasingly important to help ensure the long-term sustainability of programs. It is essential to step up the pace of innovation to achieve long-term profitability, competitiveness and sustainable agricultural production.

As the reinsurance market continues to evolve, Guy Carpenter has invested in qualified people and actuarial technology and is looking to make progress towards global food security by adopting a multi-stakeholder approach. Much of this must start with educational programs and research opportunities specializing in advanced agricultural insurance and risk management techniques.

Agricultural insurance is one of the fastest-growing lines of business in the property and casualty industry. Investing in the new research professorship will help foster and shape the next generation of actuaries trained in p&c generally, and agribusiness specifically, an area of actuarial science that has received little attention to date.

One of the goals for the professorship will be to help develop reinsurance capacity for Guy Carpenter’s crop insurance clients, as well as to create new and innovative products. Not only will Guy Carpenter’s agriculture clients benefit from the research, other interested parties – such as stakeholder groups, insurers, reinsurers and governments – will have the opportunity to liaise with the professorship to solve real-world agricultural problems. 

ENHANCING PARTNERSHIPS

Another main focus of the professorship is to strengthen public-private partnerships and encourage more co-operation and dialogue among producer organizations, insurers and reinsurers, and provincial and federal governments – something that has traditionally been somewhat limited. From a research perspective, academia can play a key role in helping to bridge the dialogue involving the private sector.

It is key that the professorship be interdisciplinary, helping to push the boundaries of innovation through collaboration that begins at the University of Manitoba across such disciplines as finance, economics, engineering, statistics and agribusiness, and extends to other universities in Canada and those around the globe. It is anticipated this broad-based co-operation will foster both improved production insurance and broader business risk management policies for agricultural producers.

Lysa Porth, Ph.D., head of the professorship, was awarded her doctorate in 2011 from the University of Manitoba and the Warren Centre for Actuarial Studies and Research, and holds an MBA with a thesis option in management science and a Bachelor of Commerce (Hons.) in financial and actuarial studies from the Asper School of Business in Winnipeg. Her industry work experience includes positions at Great West Life Assurance Company and the City of Winnipeg.

Dr. Porth, who most recently served as assistant professor in the Department of Statistics and Actuarial Science at the University of Waterloo, has accepted an assistant professor cross-appointment in the University of Manitoba’s Department of Agribusiness and Agricultural Economics, and an adjunct professor appointment in the University of Waterloo’s Department of Statistics and Actuarial Science.

In a statement last January, the University of Manitoba noted the establishment of the professorship was made possible through a gift of $750,000 from Guy Carpenter & Company. “We have the greatest respect for (Dr. Porth) and we are confident she will lead valuable research that will facilitate a deeper knowledge in this specialized field of study,” stated James McCarney, managing director of Guy Carpenter, a global provider of risk management and reinsurance intermediary services.

Dr. Porth’s research covers a breadth of topics, including crop insurance, price insurance, revenue insurance, livestock insurance, business interruption insurance and financial risk, weather insurance, weather derivatives and agricultural derivatives, as well as government agricultural and food insurance programs. Her recent research has primarily focused on developing innovative risk management products to achieve more stable incomes for agricultural producers, and more efficient risk management solutions for agricultural producers in Canada and around the world.

RESEARCH A STRONG FIT

Dr. Porth’s research program and unique interdisciplinary background is seen as a strong fit with the goals of the professorship. “Academic research in agricultural insurance and risk management from an actuarial perspective is new and emerging,” she comments.

“This is a tremendous opportunity to take a global lead in this important and interdisciplinary effort to advance the agricultural sector, both in developed markets such as Canada, as well as emerging markets such as India and China. The presence of strong and efficient agricultural insurance programs helps to align production incentives and encourage investment,” Dr. Porth adds.

Michael Benarroch, dean of the I.H. Asper Business School, emphasizes that Dr. Porth’s “background and expertise in agricultural risk management will be a great addition to our university and our faculty.”

The federal and Manitoba governments have lent their support to the professorship, citing the importance of advancing risk management in agriculture, which serves as an economic driver in the province and across the country. “We are proud of this endeavour that has governments and industry groups, the academic community and the private sector working together to develop new risk management tools for our hard- working farmers,” federal agriculture minister Gerry Ritz says in a statement.

“We are committed to giving producers the resources they need to make insurance their first line of defence when it comes to managing their risk,” notes Ron Kostyshyn, minister of Manitoba Agriculture, Food and Rural Initiatives.

Future plans to continue building the agriculture risk management and insurance program and expertise are under way. The investment by Guy Carpenter will help keep Canada at the forefront of the agricultural sector, facilitate innovative research for the global economy and contribute to the need for a multi-stakeholder approach to improve and strengthen the agricultural sector. Funding is also expected to help develop, attract and retain the world’s top agricultural insurance and risk management researchers here in Canada.