Austria wants to reform its crop insurance too: SystemAgro seen as the solution

In January 2010, national and international experts gathered in Vienna for discussions on a sustainable crop insurance system. For the impact of climate change is robbing farmers of much needed planning certainty – also in Austria. And again participants reached the same consensus: The state has to give the agricultural sector more financial support.

Flooding, hail, drought, windstorm and again hail: Not a year goes by in Austria any more without at least one natural catastrophe. The resulting losses have more than doubled over the past five years, the amount now running into billions. Austria is feeling the effects of climate change – most of all the farmers. As natural hazards grow in frequency and severity and prices for agricultural products fluctuate wildly, it is increasingly difficult to calculate where to draw the line between success and failure. Add to this the fact that in three years the EU’s rural development programme for the period 2007 to 2013 runs out, meaning that agricultural policy and subsidies will be up for renegotiation. And this is exactly where the most sustainable solution worldwide – SystemAgro – comes in.

Österreichische Hagelversicherung (ÖHV) took the opportunity to invite international experts to Vienna. At a symposium moderated by Franz Fischler, former EU Commissioner for Agriculture, Rural Development and Fisheries, politicians (including the Austrian Federal Minister of Agriculture), local farmers, representatives from the EU and the Austrian Farmers Union discussed the future of agricultural insurance in Austria. Around 80% of agricultural land in Austria is insured by the ÖHV. General Director Kurt Weinberger bemoaned the worst decade in the company’s history. Premiums in 2010 will rise by an average of 5%. The state subsidy for premiums covering windstorm and hail currently amounts to 25%. In future that will not be enough. The outcome of the discussion was clear: SystemAgro is the goal of the future, for the farmers need more planning certainty and support for their individual risk management. Therefore, state premium subsidies need to be increased while public aid has to be extended and restructured in the event of catastrophes. In countries such as the USA, Brazil or Spain, which are already organised using SystemAgro, state subsidies for premiums have been at around 60% for years. And, apart from subsidising premiums, these countries also assume a part of the losses when disaster strikes. This kind of state involvement forms the basis of a successful and sustainable crop insurance system, as shown by the global analysis of crop insurance markets in SystemAgro.

Karl Murr, head of the Agro divisional unit at Munich Re, summarised the core elements of SystemAgro in his presentation and during the subsequent panel discussion outlined what farmers were looking for from the system: coverages for frost, windstorm and drought have to be extended and policies individually tailored to the exposure of the respective farmer. SystemAgro takes into account not only these underwriting aspects but also the integration of the state. Together, these factors make it possible for a sustainable crop insurance system to function properly.