Agricultural activities face risks linked to market trends and environmental conditions, in particular climatic conditions and in Italy the heterogeneity of the territory determines a high variability of conditions and productions. These natural factors, associated with the scenarios of climate change, increase the level of uncertainty for agricultural activities, strongly influencing the interaction between climate and crops’ cycles (quantity and quality of productions) and between climate and farms’ investments (damages to equipments and infrastructures caused by extreme weather events). In order to manage risks in agriculture, one the most important instruments used in the Italian agricultural sector is the insurance system, that without doubts can be one of the central climate change adaptation options. In facts, agricultural insurance allows to manage a wide range of risks and it is theoretically enough flexible to adapt itself to changed conditions and priorities.
Italian agricultural sector already defined the agricultural insurance system as a strategic choice, actively participating to the discussion at European level in order to introduce and enhance insurance systems. During the ‘70s, a National solidarity fund (NSF), managed by Ministry of Agriculture, has been created in order to organize and give contributions to farmers for compensation for damages provoked by adverse climatic events and natural disasters. In the meantime, the NSF offered contributions to premiums for monorisk insurance (hail), offered by private insurance companies. An important reform of the Fund has been passed in 2004, adapting and modernizing it in objectives and economic instruments. The main objective of the reformed system is promoting actions of prevention in order to face damages to agricultural and animal productions, to farm infrastructures and equipments, in the areas affected by natural disasters and extreme events. The main actions and instruments are: a) measures to support insurance contracts (contributions to premiums); b) measures to compensate farmers in case of damages to productions, infrastructures and plants not included in the National insurance plan. It is important to underline the principle of exclusion of compensation aid if the same damages are covered by contributions to premiums.
The application of the reformed system in the period 2005-2009 has been positive, showing also further potentialities. The main indications are:
- NSF has been ri-oriented, with a gradual substitution of ex post aids with contributions to insurance premiums (from 2008 covering almost the 80% of the financial availability);
- constant increase of insurance spread among farms and a reduction of premiums paid by farmers (competition among private insurance companies);
- reduction of monorisk (hail) versus increase of multi-risk insurances, with the great part of insurance contracts for adverse climatic events, covering risks both for productions and infrastructures (uncertainty due to extreme events occurred in the last years).
- diversification of types of insurance, including also insurance contracts on crops’ yield;
- new mind-set among farmers: premiums considered more and more a part of the farm costs (for instance, in 2009 no contributions have been given to premiums, but the insurance campaign has been positive). The instruments showed also some critical points, such as the inconsistence of the insurance contracts in the Centre and in the South of Italy (23% of total contracts amount), the importance to have a very high level of technical expertise to quantify damages provoked by events and a deep evaluation of the link between events and yield loss.
A new and strategic phase started in 2009 with the CAP Health Check (Reg. CE/73/09). The articles 68-71 on specific support allow granting contributions to premiums to cover economic losses caused by adverse climatic events, animal diseases and plant diseases and pest infestations. Italy decided to accept the complexity of the new opportunity given by the CAP Health Check, integrating in a unified system the different funds, European funds on specific support, Common market organization for wine, that allows contributions to premiums for insurance on wine grapes, and National solidarity fund for agriculture. A big effort has been necessary to coordinate the creation of the new integrated system and of the proceedings, but several critical points have to be discussed and solved.
Concluding, some considerations can be made about the future of the insurance as economic instrument for crisis management in agriculture and as tool of adaptation to climate change. First of all, insurance should be considered an instrument among a set of actions operating at several levels of risks and damages. Regarding climate change and considering the uncertainty of the scenarios, the best choice could be to build up a very flexible set of tools and actions. From this point of view, there are some issues that still need to be analyzed in order to improve the tool and help farmers in case of extreme events and change of environmental conditions:
- definition of general homogenous criteria for risk assessment and damage evaluation referring to equity and competition rules, respecting the private nature of the insurance contracts;
- specific analysis of climatic risk and evaluation of damages caused by climatic events in the insurance system and contracts;
- effectiveness of insurance system: does the current systems need an adaptation in order to help farmers but in the meantime to enhance a farms’ structural adaptation to climate change?
- performance of the policies to assess their effectiveness and the improvements necessary;
- discussion at European level about policies and their application (new common rules and new instruments?).