Global experiences with subsidising economic insurance in agriculture.

Abstract

This two-part article is devoted to the key issues of subsidising economic insurance in agriculture, as viewed from a global perspective. The article draws on the work of researchers associated with the World Bank, Food and Agriculture Organization of the United Nations (FAO), International Food Policy Research Institute (JFRPI) and the Organization of Economic Cooperation and Development (OECD), as well as a review of subject literature conducted using a modified b a c kwa rd snowb a l l ing technique combined with manual searches. This approach therefore follows the conventions of systematic review. In addition, the author applied their long-standing experiences concerning agricultural insurance and risk management to the selection and analysis of problems. The first part focuses on a review of justifications (premises) for subsidising agricultural insurance and its impact on the insurance market, as well as on decisions made in this area by agricultural producers. The basic purpose of this part is to provide generalised knowledge in order to better understand ongoing processes, functioning mechanisms and dependencies, and consequently to improve the efficiency and effectiveness of this form of public intervention. The conducted analysis produced three conclusions. Firstly, a wide-ranging set of arguments in favour of subsidising agricultural insurance is used worldwide. Such arguments refer to both economic theory and social and political circumstances of the intervention itself, which, by their nature, are difficult to verify empirically and evaluate in a professional manner. Secondly, subsidising the prices of insurance products under c e t e r i s par ibus conditions leads to a quantitative development of the insurance market, although in the long run these prices should be based on solid actuarial foundations. Thirdly, using insurance subsidies means that farmers considering whether to purchase insurance cover are guided not just by the wish to reduce their risk exposure, but also the possibility to obtain additional transfers from the budget. Keywords: insurance decisions of farmers, demand for insurance in agriculture, subsidising agricultural insurance, agricultural insurance.