Insurance contributes to more resilient agriculture

It can be effective in mitigating agricultural losses due to the climate emergency by providing stability to agricultural production.

Cyclones, depressions, unstable weather system, storms, torrential rain, hail, heavy snowfall, lightning, wind storms, tornadoes, floods, drought, cold snaps, heat waves and fires are all risks that threaten farms, livestock and forestry, jeopardizing a necessary function of any society: food production. These risks can be minimized or transferred to a third party with the help of instruments such as agricultural insurance.

Agricultural insurance enables producers to protect their crop or livestock investments by taking out an insurance policy. It is limited to the risks caused by natural disasters, such as meteorological events, fires and certain diseases that cannot be controlled by humans.  It does not cover economic risks, which unfortunately remain the most common.

Some examples of this type of insurance are:

• Comprehensive or combined insurance: these policies cover damages resulting from insurable risks, taking into account factors such as the farm’s location and the cultivated species. Some of the combined coverage offered insures against fire, frost, rain, snow, hail, wind and so on. It covers the loss of yields caused by climatic adversity that cannot be controlled by farmers, including drought and frost. For example, crop yield insurance can cover olive, almond, cereal or vineyard plantations.
• Comprehensive insurance: covers the loss of production caused by events that cannot normally be controlled by farmers, such as hail, fire and drought.
• Livestock insurance: this type of insurance can insure against climate damage and other exceptional events; as well as:
• Accidents and animal diseases.
• Compulsory animal slaughter.
• The cost of destroying dead animals.
• Compensation for lack of pasture.

We’re seeing a rise in both the intensity and frequency of natural disasters across the globe. Therefore, every country or economic region is trying to anticipate and mitigate their impact. Managing these risks has become a necessity.  Within this analysis, insurance policies are an effective measure for mitigating their effects and overcoming these situations.

If risk management is fundamental to any activity, it is even more so in the agricultural sector, which operates outdoors. Protected agriculture offers a greater guarantee of food availability and a way of stabilizing rural populations.

In many countries, such as Spain, Canada and the United States, agricultural insurance is subsidized by the government. The most important thing to make it attractive to the crop or livestock farmer, the state and the insurer, is that the policy cover needs in case the risk materializes and an incident occurs.

Each country has a protection model within the framework of its agricultural policy.  These models seek to safeguard crops and livestock production, with different insurance lines and policy contracting options.

This protection involves taking advantage of all the opportunities that technology provides. This applies to contract execution and to managing both the quantification of damages when they occur and the payment of the corresponding indemnification, all with the utmost agility and precision.

The Spanish model, an international benchmark

In Spain, Combined Agricultural Insurance has been in place since 1980 to address natural risks affecting agriculture and livestock. It operates through a collaborative pool involving private insurance companies (Agroseguro) and the Insurance Compensation Consortium, with the latter serving as a reinsurer.

Agroseguro (Agrupación Española de Entidades Aseguradoras de los Seguros Agrarios Combinados — Spanish group of combined agricultural insurance providers) is responsible for managing combined agricultural insurance.  It does this on behalf of the insurers participating in the pool—including MAPFRE—contributing to the economic and social development of the agriculture sector.

Across its four decades, the Spanish agricultural insurance system has become an international benchmark, to the point where the European Union values the model as the best at protecting agriculture against climate*.

Agricultural insurance premiums in Spain total more than 850 million euros for insured capital of over 16 billion euros in 2022, with the main line being fruit. It is estimated that 90 percent of fruit growers have coverage against the types of incident described in the article.

Brazil, a giant agribusiness

Beyond Spain, MAPFRE offers agricultural insurance in Latin America, with special emphasis on Brazil, where the company leads with more than a 60% share of the agricultural insurance market.  It also operates in Mexico, Argentina, Uruguay, Paraguay and Colombia.

Agriculture accounts for some 40% of Brazil’s exports, mainly soybeans, meat and cereals. In this country, recognized as one of the major agricultural exporters by the UN’s Food and Agriculture Organization (FAO), the agricultural sector stands as a cornerstone of the economy.

Some of the biggest risks it faces are climate-related losses, which could result in millions of dollars of damage according to estimates recently provided at the UN Climate Change Conference.

For over 15 years, MAPFRE has been active in this segment in Brazil, providing a diverse range of insurance options covering over 60 crops. Their insurance solutions safeguard rural properties and machinery while also focusing on enhancing the lives of producers.

Hence the importance of companies such as MAPFRE continuing to deploy specific solutions for farming and livestock, together with the government, which must seek incentives to protect crop and livestock farmers.

Agritech: apps and risk management technology

Like all sectors, agriculture is increasingly digital. Producers rely on high-end technology and apps, not only to reduce redundant processes through automation or to improve productivity, but also to improve risk detection and management.

Technological farming innovations have begun emerging in recent years, in areas such as robotics. One such example is VineScout, a self-propelled, solar-powered robot that records key metrics such as vine leaf temperature and water availability.

Artificial intelligence and big data also have a role. This is the case with Israeli agritech startup Trellis, which uses AI to analyze data and predict production yields and optimum harvest timing.

* As highlighted in the report from the European Commission (2017) Insurance of weather and climate-related disaster risk: Inventory and analysis of mechanisms to support damage prevention in the EU.