Insurance of Crops – A Fresh Look

This paper examines the role of crop insurance and provides an overview of its development process.

The paper states that there are three boundaries to crop insurance:

• It is bought and sold in a market,
• It has a limited role in risk management in farming,
• Limitations to the scope for effective and economic crop insurance can change over time.

The paper describes:

• The current state of crop insurance, globally.
• The growth in demand for crop insurance and its influencing factors:
  • Crop damaging weather events,
  • Commercialization of farming,
  • World Trade Organization (WTO) regulations,
  • New insurance products,
  • Accidental introduction of exotic pests and diseases,
  • Environmental protection and food safety concerns.
  • Crop revenue insurance products and index-based insurance products.
  • Steps in the development process of crop insurance.

  The paper concludes with the following suggestions for the roles that governments and the private sector could play in crop insurance:

  • Ensuring that any existing company or new entity has a sound legal basis and an adequate financial base on which to offer insurance products,
  • Clarifying the government’s objective in promoting crop insurance,
  • Establishing strong linkages with international re-insurers,
  • Working closely with representatives of the farming and/or forestry sectors.