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Innovative Agricultural Insurance Products and Schemes

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Publication date
06/06/2007
Number of Pages
64
Language:
English
Type of Publication:
Studies
Focus Region:
Global
Focus Topic:
Climate / Weather / Environment
Market / Trade
Type of Risk:
Policy & institutional
Weather & Climate related
Type of Risk Managment Option:
Risk transfer
Risk coping
Commodity:
Crops
Author
Myong Goo Kang
Organization
Food and Agriculture Organization of the United Nations (FAO)

In light of this renewed interest in and demand for agricultural insurance, this paper first reviews how agricultural insurance products have evolved and then examines innovative products which have recently been developed and how they have been applied in practice. One major conclusion is that encouraging insurance mechanisms is preferable to ad hoc disaster aid. Disaster aid has counterproductive effects since it encourages farmers to neglect their responsibility for managing their own business risk. It tends to encourage production in marginal situations by indiscriminately covering crop losses, e.g. in fragile, arid countryside or flood-prone wetlands. In contrast, crop insurance actively reduces risk exposure by promoting public and private risk management.