Global Perspective: Measures of Efficiency of Agricultural Insurance in Italy, Economic Evaluations

The risk management policy in agriculture has become particularly prominent nowadays, considering
the evolution of the measures of the Common Agricultural Policy (CAP) and the dreaded climate
change, which seems to have considerable effects in terms of frequency and intensity of adverse
climatic events.
In a broader frame of reference, it is the Word Trade Organization Agreement on Agriculture (WTO)
that places constraints on the risk management policy in each economy.
In this context, the aim is to analyze the causes of the great loss of efficiency detected in the current
Italian insurance system, unable to deal with specific insurance coverage demands from each type of
agricultural business.
The analysis has been led through the economic evaluation of the instruments offered by the
insurance market to winegrowers and the simultaneous comparison with the probabilistic evolution of
adverse climatic events in the Controlled and Guaranteed Denomination of Origin (Docg) area of
Conegliano–Valdobbiadene. Research is carried out through a sensitivity analysis, by applying the
comparative statics approach. Furthermore, a measure of efficiency of the sector policy is suggested.
This is used in the empirical analysis as a measure of the reliability of the public intervention. The
study highlights that the subsidized coverage alone is not the most adequate measure of agricultural
policy anymore. Adhering to preferential programs implies the drafting of a supplementary insurance
policy in order to minimize the loss function. The current insurance system impasse demonstrates that
the producer hardly accepts policies which do not convert into an immediate income benefit.
From another perspective, the European risk management regulations, while trying to adjust to global
rules, show the loss limit in terms of usefulness and efficiency of the agrarian policy instruments in
use.
The prediction of probabilistic increase of severe-weather patterns cannot provide a complete
solution, there still remains the issue concerning how to split the loss expenses among society and
farmers, while insurance companies cannot disregard their own economic balance, which in contrast
benefits from it. One possible answer to the current situation could come from the development of
innovative coverage instruments, like the weather index based derivatives.
The search for innovative risk assessment models appears more urgent, for new models that could
combine the different needs of stakeholders: farmers, insurance companies, society.