Agricultural Insurance Schemes II

Index insurances, diversely from traditional agricultural insurances, do not refer to the actual farm losses but to the losses evaluated from an index. The study evaluates the feasibility of index insurances for EU and makes a cross-validation based on the yield loss risk calculated from FADN data. Premiums have been estimated for a Regional Yield Insurance (RYI) for FADN regions and a number of arable crops. Some meteorological, agro-meteorological and NDVI indicators were also analysed according to the model of the area yield-tailored insurance. From the statistical analysis the indicators do not explain yields optimally. Due to the strong heterogeneity within the EU regions, a meteorological yield-tailored index could have a better explanation capacity at a more disaggregated level. FADN data are used to compute and map the risk of yield reduction for major field crops and of income reduction by farm type. The cross validation of area yield insurance consisted on the calculation of the risk with FADN data with and without insurance. Results show that the risk reduction capacity of yield area index for the case analysed is not very high, but in some regions the risk can be reduced up to a 68%. The risk reduction capacity of other indexes is expected to be lower than the yield area index. Finally, the study shows that index products efficiency is relatively low at farm level due to the European heterogeneity of climates and geography and to the large geographical scale that had to be used in the study. So, index products could be more efficient for reinsurance that works at aggregated level.JRC.G.3-Monitoring agricultural resource

Agricultural Insurance Schemes

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 and is analysing risk and crisis management strategies to provide an improved response to crises in the agricultural sector. This 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 a collection of data on the realities and modalities of agricultural insurance in Europe. This information mainly comes from fact sheets filled in by experts or consultants from the different European countries and data from the European Committee of Insurers (CEA). Many of these data were unpublished because there is no obligation for the insurance companies to report to the EU institutions. The report quantifies and maps different types of risks, from climatic risks to yield and revenue risks. The role of Governments in helping farmers to face disasters is analyzed for every country: providing aid ex-post and offering or subsidizing insurances. The Member States definitions of crisis and disaster when authorising state aids are described and contrasted with the EU and international legislation. Aid is sometimes given on an ad-hoc basis through compensation schemes, or funds partially financed by the agricultural sector (on a voluntary or compulsory basis). Mutual funds, calamity funds and ad-hoc payments existing in European countries are summarised. The levels of ad-hoc payments per country are compared. Agricultural insurances are fostered in a number of countries. The different types of agricultural insurance systems and key figures in each country are analysed. Some technicalities are described, such as reinsurance, triggers and deductibles. The relationship between Government involvement and insurance development is highlighted. Usually private companies insure only hail and fire, and the government subsidies and public reinsurance are needed to make possible the insurance of agricultural systemic risks. One conclusion is that the risk management tools available in the Member States (MS) could be further developed. Conditions for a feasible EU-wide insurance scheme have been analysed. The possible amount of costs of an EU-supported insurance system has been roughly quantified for a few hypothetical scenarios. However, given the heterogeneous situation in the MS, the interest of a harmonised EU-wide system of agricultural insurances is debatable.JRC.G.3-Agricultur

Las medidas de gestión de mercados en la nueva PAC

Históricamente, los instrumentos de gestión de mercados constituían el núcleo de la PAC, de tal forma que medidas como las compras de intervención o la protección en frontera proporcionaban un elevado grado de sostenimiento de ingresos a gran parte de las producciones agrarias europeas

MARS Bulletin Vol 17 No 1

The annexed document is the template for the bulletin that will be issued on the 10th March. This bulletin covers meteorological analysis and crop yield forecasts for the period 21 November 2008 - 28 February 2009 (since the day after the last covered period, to the last day of the decade before)JRC.G.3-Monitoring agricultural resource

Evaluating EU Risk Management Instruments: Policy Lessons and Prospects for the Future

The objective is to summarise the policy-relevant conclusions that emerge from a thorough review of available risk management instruments. It builds on relevant literature, on recent work commissioned by EU institutions (Parliament: Cafiero et al. 2005, and the European Commission 2005, 2006a, 2006b) and on qualitative field work carried out in several EU member states. The distinction between business risks and catastrophic and crisis risks is briefly clarified. Member state data from the EC (2006a), combined with other sources and the authors' own findings, provide a snapshot of the current situation and of important trends. Subsequently the major findings of the literature about the advantages and disadvantages of the most common risk management instruments is elaborated on. Finaly, three proposals of the EC (EC, 2005), which have attracted most attention recently (Cafiero et al.2005; EC, 2006a), are discussed.JRC.G.3-Agricultur

Las Políticas de Seguridad de Ingresos

2005 saw the start of a debate, promoted by the European Commission (EC), to decide whether and how the EU should intervene to provide farmers and stockbreeders with a safety net in case of crises, disasters and catastrophes (CDCs). The article reviews national policies and reflects on the three basic options considered by the EC (farm insurance, stabilisation funds and ad hoc aids in case of CDCs). We find that both the perception of risks and the actual risk of producers in the EU differ considerably. The political options of each MS do not converge into a common pattern either. The EU has regulated national aids and encourages the MS to assign modulation funds to co-financing risk management instruments. Except in stock-breeding, no European policy is to be expected in the sphere of risks and crises, disasters and catastrophes.JRC.G.3-Agricultur

Evaluating the Potential of Whole-farm Iinsurance over Crop-specific Insurance Policies

The rationale of whole-farm insurance (WFI) is to pool all farm¿s insurable risks into a single policy. This paper compares separated multi-peril crop-specific insurance policies (CSI) with WFI. We first compare the loss ratios of frequent buyers of agricultural insurance in Spain to confirm whether data provide support for combining separate premia in WFI policies. Actuarial data show that loss ratios are lower for farmers that sign up for different insurance groups or insure more than one crop.. Secondly, using the records of farmers who bought CSI for three crops during 1993-2004, we carry out Monte-Carlo simulations to evaluate premium differences, revenue, and farmers¿ utilities (DARA-CRRA) of CSI and a WFI designed to cover the same risks than do the CSI policies. Results show that premiums are reduced by 20% and farmer¿s certainty equivalents are slightly larger. Farmers would benefit from WFI and governments would enhance the efficiency of their insurance subsidies.JRC.H.4-Monitoring Agricultural Resource

Finding Optimal Price Risk Management Instruments: the Case of the Spanish Potato Sector

This article offers a comprehensive analysis of the problem of choosing between alternative market risk management instruments. We model farmers¿ behavior to optimize the certainty equivalent, formulated by a mean¿variance model, by combining instruments with and without basis risk. Results are expressed as the demands for hedging with futures, forward contracts and insurance. Theoretical results are applied to a selection of Spanish producers of fresh potatoes, a sector that is exposed to significant market risks. Amsterdam's Euronext provides potato futures prices, and the recently launched revenue insurance in Spain provides the example for price insurance. Three conclusions summarize the article¿s main findings. First, we show that Spanish potato revenue insurance subsidies are a factor that determines the instrument rankings and choice. Second, the efficiency of insurance subsidies is generally low. Finally, the Amsterdam potato futures market does not provide a cost-effective means to manage price risks for Spanish fresh potato growers.JRC.G.3-Monitoring agricultural resource

Agricultural Risk Management in Europe with a Special Focus on Crop and Livestock Insurance

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 (Bielza et al. 2006; Bielza et al. 2009). 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.JRC.DG.G.3-Monitoring agricultural resource

Risk Management and Agricultural Insurance Schemes in Europe

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.JRC.G.3-Monitoring agricultural resource