Agricultural risk management in Europe

This paper is based on a study performed by the IPSC-Agrifish unit of Joint Research Centre (JRC) of the European Commission for DG Agriculture under request of the European Parliament. Most information comes from fact sheets collected by experts or consultants in the different countries. The definitions of crisis and disaster eligible for public aid in EU member states are analysed and compared with the "Community guidelines for state aid in the agriculture sector" (EC, 2000). New Commission Guidelines and a new Regulation have been adopted in December 2006. The paper makes a review of the agricultural risks management systems in Europe (EU27) with a special focus on agricultural insurances. The different types of agricultural insurance systems in Europe and key figures in each country are analysed. Some technicalities like reinsurance, triggers and deductibles are described. The relationship between Government involvement and insurance development is highlighted. Usually, private companies insure only hail and fire, but as the government involvement in insurance increases, more comprehensive coverage is provided by the insurance system, becoming possible the insuring of agricultural systemic risks. The role of Governments is analyzed for every country: offering or subsidising insurances and providing aid ex-post. Aid related to risks in agriculture is also given on an ad-hoc basis or through compensation schemes or calamity funds, which can be partially financed by the agricultural sector on a voluntary or compulsory basis. Payments ad-hoc and from calamity funds in most European countries are summarised and their levels are compared. The existing insurance level is generally insufficient to smooth significant income reduction in bad years. Risk management tools available in the MS could be developed further. However, given the heterogeneous situation, the interest of a harmonised EU-wide system of agricultural insurances is debatable. Conditions for a feasible EU-wide insurance scheme are analysed and classified into a) decisions of the policy makers (political criteria); b) decisions of the private sector: insurers, re-insurers and farmers (socio-economic criteria); c) technical conditions. Last, the possible amount of costs of an EU-supported insurance system has been roughly quantified for a few hypothetical scenarios, under given assumptions.