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2
1. Introduction.2. Objective.3. Background.4. Stakeholders.5. ENESA. 6. Limitations & Advantages.7. Successful keys
Paper Outline.
3
Why are we here?
Introduction.
5
Direct aidsEx - post
Mutual Funds Insurances
Indirect AidsEx - ante
• Spain
• Morroco
• USA
• Turkey
Legal Framework
Introduction.
What could Governments do?
Financial support
10
Emergency pre-empted.
Greater financial soundnes.
Transparency.
Insurer resposible for:
- damages assesment
- payment of claims
Early payment.
Hard to implement.
Difficult resourcesavailability.
Difficult damagesassesment.
Long administrativeprocedure
Delay of payments.
Introduction.
DIRECT PAYMENT EX POST
INSURANCE GRANTS EX ANTE
11
Offering protection against non- controlable risks.
Adverse weather conditionsAccidentsDiseases
Supporting financial stability of farms.Enhancing private business.
Spanish Agricultural Insurance System – Objective.
12
Private contract between the farmer and the insurancecompany.
Waiting periods
Minimiun damage tresholds
Deductibles
Bonus and surcharge system
Contract subsidised by the government
Contract supervised by the government
Detailed contract conditions on www.enesa.es
Spanish Agricultural Insurance System.
13EXTENT OF DAMAGE
NORMAL YIELD VARIATION
Farmer
Insurer
Reinsurer
Public support
NATIONAL CATASTROPHEADVERSE WEATHER EVENT
OO CC UU RR RR EE NN CC E E
PP RR OO BB AA BB II LL II TT YY
Introduction.
14
More than 34 years of experience (since 1978).
Coverage for all agricultural productions.
Progressive development of livestock and aquacultureinsurance since 2000.
Recent design of forestry insurance.
Sharing technical knowdlege with other countries.
Spanish Agricultural Insurance System.
15
0
100.000
200.000
300.000
400.000
500.000
600.000
1.980€
1.982€
1.984€
1.986€
1.988€
1.990€
1.992€
1.994€
1.996€
1.998€
2.000€
2.002€
2.004€
2.006€
2.008€
2.010€
2.012€
0,00
100,00
200,00
300,00
400,00
500,00
600,00
700,00
800,00
900,00
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Millones EUROS
Total Insurance Cost ENESA's Subsidies
N. Policies
Budget Claims
0,00100,00200,00300,00400,00500,00600,00700,00800,00900,00
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Mill
ones
EU
RO
S
ENESA's Subsidies Claims
Spanish Agricultural Insurance System.
16
Legal agreements between all political groups
Annual plan approved by agreement in the cabinet
Central and regional governments grant subsidies
Non ad-hoc aids by the central government for insurable risks
Devising technical-financial viability studies
Defining several aspects on the insurance contract: agricultural
practices, prices, underwritting period…
Spanish Agricultural Insurance System - Partnership scope.
Long – term political agreement
17
• Law 87/1978- Objective
- Stakeholders role.
- Scope.
- Insurable risks
- Insurable productions.
- Making decision procedure.
• RD 2329/79 Regulations in application of the law
• Triennial & Annual Plan
Long - term sustainable system
Legal Framework
Spanish Agricultural Insurance System - Partnership scope.
18
Farmers, represented by farmers’ unions
Insurers grouped in AGROSEGURORe-insurers
• Private
• Public: CCS-Insurance Compensation Consortium
Public administration• Central Government
• ENESA- Ministry of Agriculture, Food and Environment
• DGS+CCS- Ministry of Economy
• Regional Governments
PRIV
ATE
PUB
LIC
Spanish Agricultural Insurance System – Stakeholders.
19
FARMERSAGROSEGURO, S.A.
compensations
Policy price
Insurance Compensation Consortium
International reinsurers
RegionalGovernments
ENESA
Spanish Agricultural Insurance System - Cost sharing.
20
Coordinating public and private activities.
Defining the main lines of action through the Annual Plan.
Granting subsidies for farmers.
Developing feasability studies.
Promoting insurance in the agrarian sector.
Sharing know‐how all over the world.
ENESA - Main functions.
21
Technical and actuarial studies
INSURERSInsurance proposal
Promotion &
Marketing
ApprovalNational ForaAll Stakeholders
Coverage improvementPremium adjustment
Innovation
DebateFora
–
All Stakeholders
Results of insurance application +
Producers demands
Local
Regional
National
Vulnerability ‐
FARMERSProtection interest ‐GOVERNMENT
Revision Insurance Proposal
ENESA ‐
Co‐ordination & Surveillance
ENESA
Leadership
Co‐ordination
Surveillance
22
PUBLIC TREASURY
Ministry of Agriculture, Food and Environment ENESA
+Regional Governments
FARMERS
392.54
DISASTER RELIEF
SAVING400
INDEMNITY
765.92
FISCAL RETURNS- 15.0
FISCAL
RETURNS
Less default
FISCAL RETURNS
GRANTSMore than 800
Maintenance of economic activity
In rural areas282.75
Insured Capital: 11.200 million €N policies: 484.513
Financial flows- 2012
23
Long period is required forsatisfactory implementationRisk must be dispersed for thesustainability of the system
The moral hazard must be limited
Individualized applicationentails higher processing costs
For widespreadimplementation, public sector involvement is needed
LIMITATIONS ADVANTAGES
Financial soundnessPredictable annual budget forgrants
Coverage adapted to specialcharacteristic of areas, productions risks, farmers…
Individual assesment of damages
Quickly and efficient management
Transparency
Enhancing other agriculturalpolicies.
Reducing social pressure.
24
Consensus
Risk dispersion
Financial solvency
Solidarity
Mutual recognition Universalizerisks & productions
Voluntary
No ad-hoc grants
Assurance technic
Coordinated Agrarian Policy
Dynamic
Spanish Agricultural Insurance System - Successfull keys.
27
Drought damages are progressive .
Drought is a sistemic risk
Damages could be shadowed by other factors or risks.
Moral hazard and adverse selection must be controled.
Crop’s development could be the best choice to evaluate drought´sdamages
Agricultural Insurance & Drought.
What need we bear in mind?
28
Agricultural Insurance & Drought.
Options:
Yield Insurance.
Geographical reference.
Individual reference.
Index Insurance.
SPI : based on rainfall (Morroco, India).
NDVI: satellite images.
29
Apply since 1983
Designing for cereals, leguminous, sunflower, olive trees, almondtrees without irrigation and fruit trees in several áreas.
Guaranteed yield: 50% or 70%.
Individual yield defined with historic data from de own farmer.
Greographical yield: reference defined by government’s data.
Collaboration with Morroco.
Agricultural Insurance & Drought.
Yield Insurance - Spain
30
Apply since 2001.
Based on NDVI measured by satellite imagines (MODIS).
Coverage: additional food support due to pasture availabilityreduction.
Different level of claims according to season, area and intensity ofdrought
NDVI survey by University (LATUV).
Collaboration with Chile.
Agricultural Insurance & Drought.
Index Insurance - Spain
31
Normalized Difference Vegetation Index (NDVI)
Simple graphical indicator that can be used to analyze remote sensing measurements, and assess whether the target being observed contains live green vegetation or not.
Index Insurance - Satellite.
32
CORINE LAND COVER 1:100000 30 mts2
DEGRADACION A RESOLUCION NOAA (100 Ha/píxel) PIXELES CON APROVECHAMIENTO
74 Clases de cubierta
1 : 2.000.000 100 Ha
Index insurance for pasture.
Where could we measure?
35
0
10
20
30
40
50
60
70
80
NDVI MEDIO NDVI garantizado A NDVI garantizado BNDVI año Decenas deficitarias
Index insurance for pasture.
36
Medium cost without subsidy
Euros/animal
Medium cost with ENESA’s subsidyEuros/animal
Bovine 32,82 21,20
Equine 32,89 21,83
Sheep 4,84 3,01
Goat 4,84 3,01
Index insurance for pasture.
37
WEAKNESS
STRENGTH • Limited administrative expenses.
• Limits moral hazard.
• Avoid direct damages assesment
• Not applicable to all sort of risks.
• Geographical reference.
• Anti- selection could happen.
• Difficult to be understood by farmers.
• Difficult to select an useful parameter.
Index InsuranceYield Insurance
• Reducing anti- selection.
• Compensation more accurate.
• Easier to be understood by farmers
• Need special measures to reduce moral hazard.
• High administrative expenses.
• Need a predefined procedure to damage assesment.
38
THANKS www.enesa.es
María José ProHead of Area for International
Cooperation and [email protected]