Faced with climate challenges, a new crop insurance



“The increase in the frequency and intensity of unfavorable climatic events, linked to climate change, jeopardizes the ability to ensure the resilience of French agriculture : “Over the past five years (…) the cost of claims (…)(To) more than doubled “, notes the bill reforming agricultural insurance, presented on Wednesday 1er December in the Council of Ministers. In this context, the “The system of compensation for crop losses resulting from climatic hazards is unanimously considered to be at the end of the line”. The agricultural disaster schemes, created by the state in 1964, and the private sector multi-risk climate insurance schemes will merge to make way for a single system of compensation for farmers, largely financed by public funds.

“The meaning of the reform is to say: farmers cannot face climate risk alone”, explain to The cross Julien Denormandie, the Minister of Agriculture. A three-stage rocket is born, with each stage assuming its share of the risk. A first step, the franchise: the farmer alone will assume the smallest losses, from 20 to 30% of potential production. The second tranche goes to insurers: up to 50 to 70% of production damage. Beyond that, it is the State that will come to the rescue for agricultural disasters.

“With this project, the government is creating universal coverage for all sectors”, specifies Julien Denormandie. The minister is counting on a vote in Parliament before the end of the term, for entry into force from 2023. The envelope allocated to the device will be 600 million euros, or double the pre-existing device. The existing two-headed architecture was not satisfactory. The fund for agricultural disasters, matched by the state and the European Union, which supports farmers in the event of exceptional weather events, was criticized for its slow implementation. Above all, it did not include certain sectors: viticulture, for example, only benefited from it following the exceptional frost episode at the start of the year at the option of an ad hoc intervention by the State.

Private insurance, despite premiums subsidized at 65%, remained inaccessible for many farmers … and of little interest for insurers, structurally loss-making in this branch of activity. The Ministry of Agriculture estimates that only 18% of farmers are insured.

In any case, the government believes that insurers could not have managed the risk on their own. “One of the first debates was whether it was necessary to increase the number of insured persons in order to reduce the price thanks to pooling, continues the minister. It is an answer. But it is insufficient: recourse to national solidarity is essential. “

The private insurance part is however being renovated: insurers will have to share data relating to contracts and claims in order to standardize premiums. They should have an obligation to offer an insurance product to any farmer who requests it. “By regulating insurers, we make the system accessible to as many people as possible: it will be important to aim for the creation of groups of insurers because it is necessary to prevent insurer X from taking only the“ good risks ”, while the insurer Y only ends up with “bad risks” ”, explains Julien Denormandie.

The government intends to encourage farmers to take out insurance contracts and aims to have half of the crops insured by 2030. Farmers will be encouraged to pass the course since, because of the sharing of risk, the uninsured will be less compensated in the event of an agricultural disaster. On the other hand, contrary to the concerns of certain operators, the ministry announces that European aid from the CAP will not be conditional on the subscription of an insurance contract.

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