The experience of the developed countries has shown that it is completely delusional to try and create a modern agriculture without the powerful development of agricultural insurances. Agriculture has always been one of the most important economic branches in Romania, as it has the highest value of all European countries by GDP (8-12%). This field represents an important direction in the economic development, especially due to the high potential of the agricultural development in the E.U. countries. The present paper tries to illustrate the potential of agricultural insurances, their necessity, the general presentation of the domestic agricultural insurance market and that of the European Union's as well as the search for viable solutions of development in agriculture by the aid of insurances.agricultural insurances, agriculture, the European Union

Borza Georgiana

Nan Anca

English

Research Papers in Economics

604 
 
AGRICULTURAL INSURANCES – MEANS OF DEVELOPPING THE 
ROMANIAN AGRICULTURE AMONG THE E.U. COUNTRIES 
Nan Anca 
Babe￿-Bolyai University, Faculty of Economics and Business Administration, Cluj-Napoca 
Borza Georgiana 
Babe￿-Bolyai University, Faculty of Economics and Business Administration, Cluj-Napoca 
 
The experience of the developed countries has shown that it is completely delusional to try and 
create a modern agriculture without the powerful development of agricultural insurances. 
Agriculture has always been one of the most important economic branches in Romania, as it has 
the highest value of all European countries by GDP (8-12%). This field represents an important 
direction in the economic development, especially due to the high potential of the agricultural 
development in the E.U. countries.  
The present paper tries to illustrate the potential of agricultural insurances, their necessity, the 
general presentation of the domestic agricultural insurance market and that of the European 
Union’s as well as the search for viable solutions of development in agriculture by the aid of 
insurances.  
Keywords: agricultural insurances, agriculture, the European Union. 
JEL Classification: G22, G19, Q14. 
 
1.  Introduction 
Agricultural insurances are an important means of developing the Romanian agriculture among 
the EU countries. The reasons are the following: according to statistics, of the entire Romania 
territory of 23,8 million hectares the Romanian agricultural area is 14,7 million hectares (61,7%) 
out which only 9,4 million hectares are agricultural areas utilized for farming. Romania is the 
seventh  European  country  in  terms  of  agricultural  area  (after  Spain,  France,  Great  Britain, 
Germany, Italy, Poland) and the fifth in terms of agricultural area utilized for farming (after 
Spain, France, Germany and Poland)399. This makes the problem of rural development of great 
national and international relevance, as it also focuses on our country’s huge economic potential 
among the EU member states.  
In this context, Romania can become a strong competitor on the European Market if it knows 
how to use its resources and the EU financial support. Furthermore, the developed countries have 
proved that a successful agriculture cannot exist without a strong development of agricultural 
insurances, which are still not given the right status, though lately they have been granted more 
attention than usually. 
 
2.  The necessity of agricultural insurances  
Insurances represent an element of reducing the economic uncertainty and a means of resuming 
the temporarily suspended activity. Insurances do not reduce the variety risks, but people are 
better  prepared  to  face  them.  In  the  context  of  a  free,  undirected  economy,  any  personal 
investment is exposed to risks and uncertainty; especially in agriculture where, due to specific 
problems regarding the production process – the large output cycle, the slow turning of capital, 
the rate of profit which is much lower compared to other economic branches – a strong protection 
of investments is required. 
Agricultural insurances are extremely useful, because risks appear due to uncontrollable climatic 
changes.  Hence,  a  modern  agriculture  with  insurance  services  develops  as  farmers  begin  to 
change their way of thinking and understand that insurance means protecting themselves and 
                                                       
￿44 General view on Romania’s agriculture and rural development, http://www.madr.ro. 605 
 
most of all, protecting their agricultural investment. In our country, agricultural producers have 
restricted access to insuring their production, mainly because of the lack of financial possibilities 
to pay the insurance premium. In this case, insurances are accessible only to (trading) companies 
or to experienced economic agents. The bigger the natural disasters in the past years, the greater 
the necessity of insurance is, especially if we take into account the negative effect and the caused 
damages in economy. 
 
3. Tapping the potential of agricultural insurance 
The potential of agricultural insurances is high even if at present this type of business gives 
modest outputs. It will start to develop when agricultural producers become aware of the dangers 
their agricultural holding might be in and of the need of  insurances to help them resume their 
temporarily suspended activity.  
We may say that the Romanian market for agricultural insurances is emerging, and may become 
very successful in the industry of insurances. This market requires fair products adapted to the 
farmers’ needs and possibilities, products that should represent a balance between the price of the 
policy, paid by the insurant, and the higher and higher risk in the crop, paid by the insurer. 
Although our country has some exceptional primary agricultural resources, due to both climatic 
conditions and to the agricultural area utilized for farming which is far more extended that in the 
European Community, the agriculture sector is still one of the most unprivileged fields. 
If at present only 17% of the agricultural area utilized for farming is part of a form of insurance, 
and the average percentage in the European Community is approximately 65-70% of the insured 
potential, it is apparent that in Romania there is still a part of 48-53% (to meet the standards of 
the European Economic Community countries) of the insurable potential likely to be taken into 
consideration for insuring. The success of the rapid development of the agricultural insurance 
sector is mainly determined by the legislative coherence in the field of agriculture and, last but 
not least, by the ability of the insurance companies to offer insurance products of high quality and 
to treat their clients as partners of a shared, profitable business for both parties400.  
 
4. The Romanian agricultural insurances 
By means of an efficient development of rural areas, it is essential that the insurance industry 
should be responsible with the farmers’ protection and with reducing costs from public money. 
The acceleration of agricultural crises, as a result of more and more frequent climatic changes in 
Romania (mainly the excessive drought, floods in extensive areas, strong storms) is the primary 
cause of all loss in the Romanian agriculture. The lack of investments in this field, the insecurity 
of  the  country’s  awarding  grants  to  the  agricultural  producers,  as  well  as  the  refusal  of  the 
insurance companies to comprise in the portfolio insurance such catastrophic risks as droughts 
and floods have led to a major deadlock in agriculture. 
Romania  is  a  great  agricultural  power;  it  is  the  world’s  sixth  country  with  an  exceptional 
potential, and we must try to fully exploit it401. The new European context requires an active 
system of insuring the farming, especially if we consider the fact that Romania is four times less 
insured that the European standards state. 
In  order  for  the  insurance  system  in  the  rural  areas  to  be  successful,  one  must  apply  the 
following: 
 
   
                                                       
400 Ionete Andreea, Interviu cu Anghel Burghil￿, http://www.1asig.ro, (2008). 
401 Eremia C., Protejarea produc￿torului agricol prin asigurare, Lumea Satului, no. 21, (2008). 
 606 
 
￿
2% 6%
26%
46%
20% Foarte mic￿
Mic￿
Moderat￿
Mare
Foarte mare
Figure no 1: Who has to be involved in the insurance system of a professional rural area? 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Source: Ciobotaru P.N., Managementul riscurilor în agricultur￿, http://www.xprimm.ro, (2009). 
 
One question that may arise is if enforcing a complex program of transfering the financial risks is 
a solution to bring the economic sector afloat.  
Thus, the Government should take part in improving legislation on agricultural insurances as well 
as in paying compensations; it should create secure and stable conditions in order to help improve 
the activity in this branch of the national economy.  It is necessary that, regardless the conditions, 
the producers should preserve the ability to resume the production activity and to ensure constant 
market supply with foodstuffs. Locally, regionally and nationally, the food market should not be 
put at risk. It is also important that the role of the associations of producers in the development 
and efficient working of an agricultural insurance system in rural areas increase402. 
 
Opinion Poll… 
Graphic no.1: To what extent are insurances a solution in supporting the development of the    
Romanian agricultural sector? 
According  to  Sergiu  Costache’s  comsumer 
survey  '  To  what  extent  are  insurances  a 
solution in supporting the development of the 
Romanian agricultural sector?' published in The 
National Conference of Agricultural Insurances 
in march 2009, most of the people who have 
taken the survey consider that insurances are a 
                                                       
402 Tab￿r￿ V., Cu natura nu te joci.., Lumea Satului, Nr. 7,(2009). 
Employers’ 
Associations 
Insurance  Supervisory 
Commission  
Romanian Parliament 
Insurance Companies 
International Bodies 
Mass Media 
Laws  on  supporting  the  development  of  rural  areas  and  of  a 
sustainable  agriculture  in  Romania  (e.g.  amending  the  Law 
381/2002). 
Authorisation  based  on  risk,  targeting  solvency,  introducing 
SOLVENCY II, protecting the insurants 
Offering  of  viable  insurance  products  for  sale,  professional 
investigating of events, payment in due time. 
 
Promoting  the  system  of  insurances  among  the  members  by 
highlighting its importance in a sustainable development. 
Involvement  in  financing  some  projects,  consulting  on  their 
realization and promotion. 
Fair  illustration  of  projects,  promoting  the  implementation 
activities 
Romanian Government  Measures  to    enforce  the  law,  fair  budget  to  encourage 
development, risk management, stimulus measures 
Trade Unions 
Supporting  the  necessity  of  insurances  in  order  to  protect  the 
unionists and the jobs. 
very  low 
low 
moderate 
great 
very great  
moderat
e 607 
 
solution for developing the national agricultural sector. 
 
 
Source: Costache S., Sondaj de opinie, http://www.xprimm.ro, (2009). 
 
5. A European perspective on agricultural insurances 
In the European Union countries, the Government directly supports the sector of agricultural 
insurances by giving 50-80% of the insurance premiums related to natural risks. As for the major 
risks whose effects lead to important losses of agricultural productions on a large scale, the 
Government should take responsibility in supporting the farmers with the help of a specially 
created  and  administered fund.  Such funds  are:    The  National  Solidarity  Fund  in  Italy,  The 
National Agricultural Disaster Guarantee Fund in France and The National Insurance Fund in 
Agriculture in Spain. 
 In the European Union countries, the governments give compensations by paying huge amounts 
of money for the insurance funds, which could not have been definitely paid by the private sector 
(insurance/reinsurance companies). Farmers are granted access to these funds only if they buy the 
insurance policy related to the natural risks that take place on confined areas. It is important that, 
by supporting the farmers’ insurance policies, the government should bring its contribution to the 
stabilization of the production, as well as to the farmers’ incomes and to the functionality of the 
insurance system of the rural areas’ activities.  
Spain is the country with the best developed agricultural insurance system in Europe, and most of 
the risks that might lead to a declining output are covered by insurance. The government, the 
farmers’ associations and the insurers have agreed on the fact that a system of insurance for 
farmers, determined by a specific law, is the best solution to the management of the agricultural 
catastrophic losses. 
France,  Italy,  Austria  and  Luxemburg  also  have  a  viable  insurance  system,  and  the  loss  of 
production is covered by insurance for most risks. The generally accepted solution is that of a 
basic insurance, for hail, to which a supplement for insuring the output is added; this supplement 
is  partially  paid  by  the  government  and  it  is  useful  for  the  most  important  risks  that  are 
characteristics to each and every one of the above-mentioned countries. 
In Portugal and Sweden, as well as in most of the Central and Eastern European countries such as 
Bulgaria,  the  Czech  Republic,  Hungary,  Romania,  Slovakia  and  Slovenia,  there  is  a  basic 
insurance to which one can supplementary add, if available, an insurance for combined risks. 
This means that only hail and a small number of natural risks are covered by insurance. 
There are also other countries in which the insurance for hail or other types of insurance for 
single risk are the only ones available. On markets as Belgium, Germany, Holland or Great 
Britain, the demand for other types of agricultural insurances is almost inexistent. Furthermore, 
there are no public subsidy formulae for agricultural insurances. 
North-European countries are generally characterizes by a low level of demand for agricultural 
insurances,  but  solutions  are  still  given  in  some  countries:  one  example  is  ‘the  Corp 
Compensation Scheme’ in Finland, whose role is to compensate for production losses caused by 
catastrophic natural risks. 
A particular case is that of the systems in Greece and Cyprus, where there is a public system of 
agricultural compulsory insurance. 
If the specialists’ forecasts will prove to be true, in 2050 the European countries will have a 
different  agricultural  profit,  which  will  lead  to  a  different  risk  management  scheme  and, 
implicitly, to the need of adapting the insurance systems403. 
                                                       
403Ghetu, Daniela, "Agricultura asigur￿rilor. Sisteme de asigur￿ri agricole din Uniunea European￿", in 
PRIMM Asigurari & Pensi, no. 8 (2008), p. 16-19. 608 
 
Unlike the European Union market, agricultural insurances in our countries are cheaper and not 
so common. In Italy, more than 905 of the agricultural area is insured, while in our country only 
1 million out of 9 million hectares is insured. 
In Italy, there is a tradition that people do not even sign the policy. They take out a multiannual 
policy for 5-10 years and when the policy expires, the insurant’s duty is to send the insurer a note 
in which he states that he agrees to renew the policy and the sum he pays to do so. 
There is a big difference so as to the taxes. If in Italy the value of the insurance is no less than 6% 
of the entire insured money, in Spain it is 7%, in Holland, more than 9%, in Romania there are 
companies that do it for 0,8-0,9%. The average is 2,5%. 
The insurers explain the low taxes by stating that some companies have bidden for very low 
prices so as to enter the market. But the insurants have become accustomed with these taxes and 
look  for  the  best  offer.  Yet,  the  important  agricultural  insurance  companies  do  not  accept 
negotiations of this type, although the risk of not fulfilling the target is high404. 
 
6. Promoting agricultural insurances 
With a view to have a competitive agriculture and insurance system there are two categories of 
solutions: some that depend on the insurance companies and some that depend on the regulatory 
authorities  in  the  domain,  here  referring  to  the  Insurance  Supervisory  Commission  and  the 
Minister of Agriculture.  
Some of the measures that could stimulate the development of agricultural insurances are:  
-  one of the measures is the granting of at least 50% of the insurance premium; 
-  improving existing legislation in this field, because it has a particular feature that needs 
special attention (e.g. by amending Law 381/2002); 
-  paying  for  the  losses  in  due  time,  so  that  the  farmers  could  resume  their 
temporarily suspended activity; 
-  the need of reconsidering the product offer by the insurers and adapting them to the 
farmers’ needs and possibilities; 
-  reorganizing  the  insurance  system  by  means  of  a  public-private  partnership  or 
other methods such as the Ministry’s imposing of minimum taxes, based on risk 
management,  or  the  companies’  taking  over  of  catastrophic  risks,  taking  into 
account the country’s involvement in creating a fund that would cover these risks 
or a reinsurance company for agriculture. 
 
7. Conclusions 
Agricultural  insurances  play  a  significant  role  in  stimulating  agricultural  investments  and 
stabilizing the agricultural farmers’ incomes. Granting the insurance premiums may be a starting 
point in a sustainable development of both the agricultural insurance sector and the Romanian 
agriculture. 
The potential of agricultural insurances is high even if at present this type of business gives 
modest outputs. It will start to develop when agricultural producers become aware of the dangers 
their agricultural holding might be in and of the need of insurances to help them resume their 
temporarily suspended activity. Thus, we have to highlight the development of the energy crop 
insurances (for instance, rapeseed). 
Agricultural insurances are influenced by the division of the real property, the creation of a large 
number of private producers whose output is non-productive, the abandoning of farms and the 
lack  of  financial  support  from  the  Government  and  the  banks.  Moreover,  the  lack  of  high 
technology, of financial support for agricultural producers, as well as the poor information on 
                                                       
404 European funds will give an impulse to agricultural insurances, http://www.asigurari.ro, (2008). 609 
 
insurance  given  to  the  farmers  are  the  main  obstacles  in  developing  the  agriculture  and  the 
agricultural insurance market. 
Bibliography 
1.  Eremia C., Protejarea produc￿torului agricol prin asigurare, Lumea Satului, no. 21, (2008).  
2.  Ghetu,  Daniela  ,  Agricultura  asigur￿rilor.  Sisteme  de  asigur￿ri  agricole  din  Uniunea 
European￿, XPRIMM, no. 8, (2008). 
3.  Tab￿r￿ V., Cu natura nu te joci..., Lumea Satului, no. 7, (2009). 
 
Explored sites: 
*** http://www.1asig.ro, Andreea Ionete, Interviu cu Anghel Burghil￿, (2008). 
*** http://www.asigurari.ro, Fondurile europene vor impulsiona asigur￿rile agricole, (2008). 
*** http://www.madr.ro, Prezentare general￿ a agriculturii ￿i dezvolt￿rii rurale din România. 
*** http://www.xprimm.ro, Ciobotaru P.N., Managementul riscurilor în agricultur￿, (2009). 
*** http://www.xprimm.ro, Costache S., Sondaj de opinie, (2009). 
 
 
 
 
 
   

AGRICULTURAL INSURANCES - MEANS OF DEVELOPPING THE ROMANIAN AGRICULTURE AMONG THE E.U. COUNTRIES

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AGRICULTURAL INSURANCES - MEANS OF DEVELOPPING THE ROMANIAN AGRICULTURE AMONG THE E.U. COUNTRIES

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