Agricultural Risk Transfer

CHAPTER 5Agricultural Insurance

5.1 INTRODUCTION

Agricultural insurance covers agricultural production assets which are all biological systems and include crop, livestock, aquaculture, equine and bloodstock, forestry and greenhouses. Insurance is the main and often the only way to transfer production risks from individual producers, agribusinesses and government entities to (re)insurers or capital markets. Agricultural insurance is one of the fastest growing lines of insurance business, is a major contributor to rural development and stability, and is typically part of a national disaster risk management and financing framework, under which particularly crop and livestock insurance benefits from government premium subsidies. Risk management products including insurance have significantly contributed to the growth in agricultural production through the provision of safety nets for farming communities and collateral for lending.

Over time, most of the initial public sector insurance schemes have evolved into public–private partnerships with substantial government support, while commercial insurance has existed in parallel. Agricultural insurance has developed differently in markets with large farm structures with mainly indemnity-based products compared with smallholder systems where index insurance and calamity-based schemes have been implemented. The recognition of agricultural insurance as an allowed form of support of governments under World Trade Organization (WTO) rules and ...