To support the development of parametric policies in the Italian agrifood market, to create the first technology-based ecosystem blockchain. This is the goal of Agrifood Sandbox, an initiative promoted by Cetif through which it will be possible to experiment with the underwriting of index-based insurance policies age-volved by public contribution, as defined by the Pgra (Agricultural Risk Management Plan). The availability of parametric digital and age-volved policies, based on technology blockchain, would make it possible to respond in a functional, effective and divers-ified way to the many cases, conditions and sce-naries of the agrifood supply chain. For farmers, this platform would offer a tool with which to easily manage the entire process, from underwriting the policy facilitated by public contribution to compensation.
Agrifood Sandbox ," explains Chiara Frigerio, secretary-general of Cetif , "is an experimenta-tion conducted with the aim of bringing strong in-novation to the Italian agricultural risk insurance market. With the collaboration of Hort@ (model&data provider), the innovative start-up Wesmarti (pla-tform provider) and Reply (industrial partner), the first Italian ecosystem based on tecnolo-gy blockchain, has been created for the development and testing of a fully digital underwriting and po-lizza lifecycle management process."
EXPOSURE TO CLIMATE CHANGE
The relationship linking the agricultural ecosystem to weather phenomena is unique. In fact, this sector represents one of the production segments most exposed to the impacts of climate change, which generates negative fallout in terms of production contraction and market fluctuations. In 2020, Ismea (Institute of Services for the Agricultural Food Market) quantified the total catastrophic damage at more than 600 million euros.
Against this backdrop are a series of regulatory interventions to support re-risk management tools in agriculture, including through the recognition of economic contributions and facilitations in relation to innovative index-based and parametric policies, as provided for in the Psrn (National Rural Development Program, 2014-2020) and transposed within the Pgra (Agricultural Risk Management Plan).
However, the results of the 2021 campaign presented by Ismea te-stimonize a decrease in agri-culture companies operating in the vegetable crops sector that have taken out a subsidized insurance contract (- 0.4 percent compared to 2020). In contrast, the volume of insurance premiums paid to insurance companies is steadily increasing.
"These data," observes Frigerio, "can be justi-ficated by an increasing increase in the ac- cidence frequency and severity of adverse weather events. These factors have led to a signi-ficant increase in claims in the agricultural sector, with inevitable repercussions on the insurance market." The ever-increasing economic exposure of compa-nies has as a direct consequence an increase in the cohort of rates. As shown by an Ania statistic, over the past eleven years, insurance companies active in the agricultural sector have recorded a combined ratio of more than 110 percent during the period.
THE START OF THE EXPERIMENTATION
Agrifood Sandbox has seen the active participation of entities that, in various capacities, operate in the agricultural risk axi-curative chain. The project's scientific committee, which has the task of directing and monitoring the experimentation and bringing its evidence to institutional contexts, includes, Ania, Ivass, Ismea, Asna-codi Italia, Coldiretti, Confagricoltura, CoorDifesa. Cattolica Insurance and Reale Mutua are the first companies that have concretely experimented with their end customers (farms) with para-metric solutions to guarantee the phytosanitary risk for the wine grape supply chain.
The experimentation was carried out in a protected and controlled environment. From a techno-logical and infrastructural point of view, the activities were conducted using a blockchain permissioned Hyperledger architecture. Additional enabling components, such as smart contracts and external oracles, were also used.
A LITTLE BIG REVOLUTION FOR THE ITALIAN MARKET
"Through Sandbox ," notes Frigerio, "a parametric product was created and developed that enabled the provision of an indemnity calculated pro-rata to the positive deviation between the value of the final pressure index of each phytopathy og-ject of the policy contract and a reference index, net of the application of deductibles, uncovered and/or indemnity limits.
For the purpose of damage calculation, "an innovative scientific me-todology has been used, which has already shown important elements of added value as the result of established research and scientific knowledge.
Frigerio points out that activities are still underway to refine the models that will ensure a better balance between the needs of the insurance company and the expectations of the insurance coverage users.
"The experimental activities conducted so far," Frigerio con-cludes, "have enabled the definition and testing of a new insurance coverage model for the agricultural risk market whose usefulness and efficiency has been recognized and demonstrated at the ecosystem level. The working group also set itself the goal of constructing an insurance policy that would fall within the perimeter of policies facilitated by public contribution according to the provisions of Pgra 2022."
Starting this year, it will therefore be possible for interested operators (insurance companies and di- stributors) to take part in the final phase of the speri-mentation, which will enable the go-to-market of policies facilitated by public contribution. A true revolution, which the Italian insurance industry is called upon to effectively preside over and promote.