Risk Management and Agricultural Insurance Schemes in Europe

Abstract

Agricultural producers face a series of risks affecting the income and welfare of their households. These are mainly production risks related to weather conditions, pests and diseases, market conditions, liberalization policies, climate change, etc. In recent years the European Union has been considering a possible integration of risk management in the Common Agricultural Policy (CAP) and is analysing risk and crisis management strategies to provide an improved response to crises in the agricultural sector. The report reviews the agricultural risk management systems in the EU-27 (candidate countries Turkey and Croatia are also analysed) with a special focus on types of agricultural insurance. The study contains data collected by experts or consultants from the different European countries. Many of these data were unpublished. Governments have an important role in helping farmers to face disasters. Usually they provide ex-post aids and sometimes they offer or subsidise insurances. Ex-post aid is either given on an ad-hoc basis, either through compensation schemes or through funds partially financed by the agricultural sector (on a voluntary or compulsory basis). Before the entry into force of the 2006 Regulation (EC, 2006a), each Member State (MS) had adopted its own definition of crisis and disaster for authorising state aids. The revision of the mutual funds, calamity funds and ad-hoc payments existing in European countries shows that about 50% of the annual ad-hoc payments are given for natural disasters like drought, frost, flood and excessive rain, and that in some countries aid is only given for livestock diseases. Several types of agricultural insurance systems exist in each country and key figures describe their technicalities, such as reinsurance, triggers and deductibles. Agricultural insurances are fostered in a number of countries. Government¿s involvement is crucial for insurance development: while private companies insure only hail and fire, the insurance of agricultural systemic risks becomes affordable for farmers only with government subsidies and/or public reinsurance.