Climatic hazards, hail: the best cover for farmers

Heavy storms and hail hit many crops in late May and early June, again raising the issue of insuring farmers against climate risks. Currently, only 30% of agricultural land is insured.

In mid-June, the government recalled existing measures and a new universal coverage scheme for farmers, which should be operational in 2023. The reform aims to protect farmers in the event of exceptional climatic hazards and creation mechanism of national solidarity quickly compensate for crop losses.

The existing system aims to compensate and insure farmers against climate risks

A distinction must be made between whether or not crop risk is considered insured.

Coverage and compensation of risks that are considered insurance

A multi-risk climate contract (CMCR) is a contract between a farmer and an insurance company designed to cover a certain amount of the crop from climate hazards. Its feature is that it offers three levels of guarantees:

  • The first level covers the costs incurred for the production of the affected crop and which benefits from the state subsidy of a maximum of 65%.
  • The second level will allow the operator to obtain a guarantee based on its turnover, and which also receives a subsidy, but at a rate lower than at the first level,
  • And the third level (non-subsidized) allows you to subscribe to additional guarantees (redemption or reduction of the deductible, etc.).

However, this CMCR has two main shortcomings that make it obsolete to address current climate change issues in crops: only about 30% of farmers subscribe to it (mainly due to its cost and number of exemptions), and it is structurally deficient due to the spread of climate change. hazards over the last 10 years: droughts, floods, frosts, storms, hail, etc.

Coverage and compensation of risks recognized as uninsured

Climate risks that the insurance company considers uninsured can be compensated National Fund for Agricultural Risk Management (FNGRA) called the Catastrophe Fund. This fund intervenes only if the farmer has suffered a loss of crop or loss of funds as a result of an exceptional and rare climatic phenomenon that is considered uninsured. Any compensation process is carried out on a special website.

New system of agricultural insurance: universal coverage will work from 2023

To improve coverage and compensation for farmers facing an outdated system, government authorities adopted an agricultural insurance reform in early March to better compensate for crop losses and better protect farms from danger. The “Guidance Law 22 2022-298 of 2 March 2022 on Better Distribution of Harvest Insurance in Agriculture and Reforming Climate Risk Management Instruments in Agriculture” establishes protection against climate risks for all farmers.

Universal agricultural coverage of climate risk

The new device will be based on a three-level mechanism of climate risk distribution between farmers, the state and insurance companies:

  • The first stage will be based on the fact that the farmer takes responsibility for the so-called low-intensity risks (less than 20%),
  • The second floor will allow, for medium-intensity risks, to combine risks between territories and sectors through a harvest insurance contract (MRC), the premiums of which are paid by the “State,
  • The third floor will allow, for so-called catastrophic risks, a direct guarantee against risks for all crops by the National Fund for Agricultural Risk Management (FNGRA).

Thresholds for each of the three floors will be set in regulations during 2022.

This new system will enter into force 1is January 2023, after the provisions defining the rules of insurance of the new system will be published in 2022.

This crop insurance reform profoundly changes the existing system, favoring four principles of insurance:

  • National solidarity between the state, insurers, farmers to cover risks,
  • Versatility, where every farmer can benefit from covering catastrophic risks,
  • Speed ​​of compensation terms,
  • Simplicity compared to the previous device.