Disasters hit hard. Adverse weather events such as drought, excessive rains, storms and hurricanes cause heavy losses to farmers. Disasters can often not be prevented from happening but they can, to some extent, be predicted and arrangements can be made to reduce their impact. However, in some cases, disasters cannot be predicted and farmers will have to cope with major losses after the event occurs.
Agricultural insurance, including livestock, fisheries and forestry, is especially geared to covering losses from adverse weather and similar events beyond the control of farmers. It is one of the most quoted tools for managing risks associated with farming. Many pilot programmes have been developed over the years, targeting especially small-scale farmers in developing countries, but agricultural insurance remains primarily a business which involves developed country farmers. Only a minor percentage of global premiums is paid in the developing world where insurance is mainly available only to larger and wealthier farmers.
Insurance spreads risk across the farming industry or the economy or, in the case of international reinsurance, to the international sphere. Insurance is sold and bought in a market. The purchasers must perceive that the premiums and expected benefits offer value; the sellers must see opportunity for a positive actuarial outcome, over time, and profit.
Insurance is not the universal solution to the risk and uncertainties that farmers face. It can only address part of the losses resulting from some perils and is not a substitute for good on-farm risk-management techniques, sound production and farm management practices and investments in technology.
Worker harvesting organic pepper at a small farm in the Cardamom hills