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Question: Prospects for agricultural insurance in Europe

Answer: The agricultural insurance landscape in the European Union (EU) is diverse. Member states are facing different types of risks, and also the cultural and political environment varies between member states. In addition, the so-called risk management toolbox of the common agricultural policy (CAP) authorises public support for different tools including insurance, mutual funds and income stabilisation tools (European Commission, 2016a). Governments’ attitudes towards disaster payments also differ between member states, thereby likely influencing the farmers’ willingness to pay for insurance and consequently the development of (private) insurance schemes. For instance, while France and Romania provided substantial amounts of disaster payments to farmers after major floods (European Commission, 2017a), the Dutch Government withdrew from such payments in 2017 for any losses which could be insured on public-private insurance markets (Van Asseldonk et al., 2018).
In 2018, the risk management toolbox of the CAP was further extended. It now authorises member states to increase support rates for crop and livestock insurance to 70 per cent of premiums and to annually inject payments into mutual funds (European Commission, 2017b). Such extensions seem to indicate that the EU has chosen for a public-private partnership approach for agricultural insurance comparable to e.g. the US crop insurance programme. Such public-private partnerships have been advocated to extract at least some of the insured’s willingness to pay to co-finance protection, which would otherwise fall within the sole responsibility of the public sector in case of disaster payments (Van Asseldonk et al., 2018). Moreover, public-private partnerships for insurance could provide for a fairer way of allocating public funds to agriculture compared to the current system in which most of the budget is used for direct payments, unequally distributed among members states and sectors (European Commission, 2017c).
Yet, despite the fact that the public-private partnership approach for agricultural insurance is currently being explored in the risk management toolbox of the CAP, member states have much flexibility with regard to its utilisation. For instance, they can decide not to utilise the instruments because they prioritise other rural development goals, such as greening, or because conditions of the risk management toolbox are perceived as too stringent (Meuwissen et al., 2013). Also, concerns with regard to market distortions can play a role. Buckwell et al. (2017, p. 9) argued that risk mitigation should be mainly based on private risk management measures. They state that public support to such measures would have to be only on a temporary basis, “e.g. to help meet the costs of producer organisations or the set-up of private insurance markets where these are underdeveloped”.
Within this heterogeneous landscape, the aim of this paper is to provide an overview of the state of play of agricultural insurance in the EU[1] and to prioritise the research agenda with regard to European agricultural insurance. The state of play builds on literature and eight case studies (papers in this issue). For the research agenda, we elaborate on the case studies and use insights obtained from a group discussion with six key stakeholders equally representing public and private parties, all with EU-wide experience on commercial and supported agricultural insurance schemes.

(Source: , 17 Sep 2021)

Source Link: https://doi-org.onlinedatabase.librarynet.com.my/10.1108/AFR-04-2018-093