The lack of rainfall during the first half of this year, barely alleviated by the heavy rains at the end of May and the first part of June, is assuming an unprecedented outlay for the Spanish agricultural insurance system, known as Agroseguro (Agrupaci on Española de Insurance Entities of Combined Agricultural Insurance). According to data released this Thursday, as of July 13, a record amount of 430.68 million euros has been paid in compensation. A figure that, Agroseguro sources consulted by this means, assume that it will be closer to 500 million euros at the end of the year. This is because only the compensations related to winter arable crops (winter cereal such as rye or oats, legumes and rapeseed) that are already appraised have been entered. It remains to estimate possible effects on crops such as vineyards, olive groves and sunflowers.
The above data is historical and is well above the amount paid by Agroseguro in the 2017 drought, which reached 220 million euros; and it clearly pales in comparison to the compensation paid during the first half of last year as claims due to low rainfall, which amounted to 90 million euros. At a global level, the bill for accidents in the field continues to climb and add new maximums. In a recent meeting with journalists, from Agroseguro, it was put on the table that the global amount (including other claims such as floods, frost, hailstones, etc.) that the agricultural insurance system must pay will exceed 900 million euros this year. A new peak in compensation that adds up to several years ‘in crescendo’: 626.62 million euros in 2019; 616.19 million euros three years ago; 747.78 million in 2021; and 806.71 million in 2022.
On the other hand, the sources consulted have estimated the area affected by the lack of rain at around two million hectares and recall the commitment to comply with the average payment term of recent years of 30 days after the final appraisal of the sinus tro . In this sense, to questions from La Información, from the main agrarian organizations (Asaja, COAG and UPA) they emphasize that the valuation of the claims and the payment of the corresponding compensations is taking place without notable incidents.
The agricultural insurance reform
However, the agrarian organizations include within the proposals sent to the main political parties on the occasion of the elections on July 23, proposals to strengthen and reform the agrarian insurance. thorough review” of the Agricultural Insurance system and criticized that “certain lines of contracting” do not work. While, from UPA, they highlight that in the last legislature public support for agricultural insurance has gone from 211.77 million to 317.73 million euros, which, in his opinion, is “a floor for the coming years” that must be guaranteed “at least”.
In this line, they are committed to reaching the maximum allowed by European regulations of 70% subsidy of the cost of the premium. Specifically, it proposes a “much more aggressive” modulation starting at 10,000 euros to direct the largest compensation towards family farming. In addition to proposing the “universalization” of the basic catastrophe insurance and the limitation of the maximum “what is insurable is not compensable” to lines of insurance with a strong establishment. For their part, from Unión de Uniones, they lament “the less attractiveness” of a growing number of lines and bet on “prioritization criteria” in public subsidies to cost the premiums and “advance” in the feasibility study of “an insurance global or unique exploitation for priority exploitations” that includes the volatility of the agricultural markets.
Public subsidies and the Consortium, vital
In any case, the Agroseguro sources acknowledge that despite the hefty bill that is leaving the recurrence of climatic events such as drought, the Insurance Compensation Consortium is becoming an important ally for the entity. According to Agroseguro’s Annual Report, this entity paid 164 million euros in compensation last year.
Another important support for the agricultural insurance system is the growing public co-financing. Specifically, the Ministry of Agriculture activated this Thursday the supplementary subsidy of 40.5 million euros aimed at 63,000 insurance policies against drought. A support contemplated within the last royal decree-law of aid against the lack of rainfall approved on May 4. Which will allow, in these cases, to reach the maximum of 70% public subsidy on the cost of the insurance premium that European legislation allows.
In any case, public subsidies have been channeled through the traditional annual agreement with the State Agricultural Insurance Entity (ENESA), under the Ministry of Agriculture. The last one signed foresees for this year a co-financing of 317.7 million euros to subsidize the contracting of policies, in line with the modification to eliminate last year. The budget for this concept has increased by more than 50% since 2020.
