Munich The increasing threats posed by climate change are leading to new insurance concepts for agriculture, which is particularly affected. Bavaria is the first federal state to decide that the state will cover up to half of the costs for the so-called multi-risk insurance against frost, heat and flooding for agriculture, among other things.
The Ministry of Agriculture in Munich is currently informing farmers. If the industry association GDV has its way, the other 15 federal states should follow.
Months of drought meant high losses for agriculture. From mid-September, there were frequent regional heavy rains and severe thunderstorms. “We can’t even imagine many dangers and extreme events in the future, there’s going to be a mega problem,” fears Alexander Lührig, head of Allianz’s agricultural division.
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His company made a significant contribution to the new solution, in which the Free State of Bavaria will in future also assume up to half of the insurance contributions from farmers.
More insurance protection in the event of a claim as the goal
This solution should now result in claims being insured more frequently and calls for the state to be less frequent after each new catastrophe. More than 70 percent of farmers are currently insured against hail damage. This type of protection has been around for 180 years.
However, the damage caused by drought in agriculture is relatively new. Only less than one percent of farmers are insured against it. Most recently, however, the damage caused by drought was significantly higher than by hail.
One reason for the low insurance coverage in agriculture is the high cost. As an anchor price, farmers have the traditional and widespread hail insurance in mind. As a rule of thumb for calculating the protection against hailstorms only, around 0.5 to four percent of the hectare value of the cultivated crop applies, depending on the region.
This is currently around 2,000 euros for grain and around 2,700 euros for corn. In the case of a strawberry field, however, the yield per hectare can quickly reach 30,000 euros or, in special cases, more than 80,000 euros.
In the case of multi-risk insurance that covers a large number of different types of damage, the insurance premium increases to three to over ten percent of the insured value, depending on the region. For many farmers, this was previously too much, since the insurance premiums add up to several thousand or tens of thousands of euros per year, depending on the size of the farm.
If, as in Bavaria, the state pays up to half of the contribution, the insurers hope for a significantly higher demand. Nevertheless, farmers should be free to choose whether to insure themselves against natural hazards or not.
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In principle, however, state support for insurance premiums also means that the state should not automatically call for help in the event of future natural damage. However, it is questionable to what extent this can be maintained in practice.
Other states should follow suit
The aim of the insurers is, however, that the 15 other federal states also support their farmers with the insurance contributions in the future. Accordingly, Anja Schäfer-Rohrbach, deputy general manager of the industry association GDV, appeals for the Bavarian regulation to be followed: “In view of increasing periods of drought and more frequent extreme weather conditions, we insurers have long been calling for subsidies for agricultural multi-risk insurance to help farmers.”
So far, however, state support for insurance contributions has been more of a patchwork quilt depending on the federal state. In Baden-Württemberg, Rhineland-Palatinate, Thuringia, Saxony and Saxony-Anhalt, fruit growers and winegrowers who are at risk of frost receive support, but not the much larger crops.
In the past, this was justified, among other things, by the fact that the damage after late frost periods in May in fruit and wine growing was particularly high. Regional aspects also often play a role. Thuringia supports the cultivation of medicinal, aromatic and aromatic plants.
However, the state support for the Bavarian farmers, who are now being supported by the Free State with their insurance contributions, has a supposed catch. The deductible for damage is high at around 20 percent of the sum insured.
“This is intended to encourage the farmer to act preventively and consciously avoid damage, for example by selecting plants that are particularly resistant to drought,” explains Allianz agricultural manager Lührig.
More: Insurers under pressure: Natural catastrophes are becoming stronger and more frequent