Abstract
Over the last years, the agricultural sector has faced increasing risks related not only to production activities, but also to climate adversity and a higher frequency of extreme events. These factors, combined with increased price volatility in the markets, have caused greater exposure to risk for farmers. For this reason, risk management in agriculture has taken on an important role within the Common Agricultural Policy. However, in recent years, gradual disaffection of farmers, low penetration of insurance in the arable sector, and a greater need for insurance coverage against market risks have characterised the subsidised risk management system. For all these reasons, starting in 2017, the National Agricultural Insurance Plan has provided new possibilities for covering risks. This paper aims to contribute to the debate on risk management linked to the revenue insurance policy recently adopted in Italy. Using data from the Italian Farm Accountancy Data Network, we simulate the application of the revenue insurance policy with a sample of Italian farms operating in the common and durum wheat sectors. The main findings show that the revenue insurance policy stipulation is, overall, sustainable for both farms and insurance companies.
Highlights
IntroductionPublisher’s Note: MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affiliations
From the point of view of economic analysis at the national level, with this paper we aim to investigate and evaluate the numbers and types of farms that may have an economic interest in the revenue insurance policy, starting from business and market variables and showing the economic sustainability of this new insurance product
All economic activities are subject to multiple sources of risk, especially in the agricultural sector, as it is sensitive to climate change (Mendelsohn et al 1994)
Summary
Publisher’s Note: MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affiliations. Agriculture activity is risky, and farmers are risk-averse by nature. Risk aversion is a relative concept, and can vary according to the context and circumstances (Iyer et al 2020). Farmers face different kind of risks, including those related to yield and price variability, which impact profitability (Trestini et al 2017). As shown by Spiegel et al (2020), farmers mainly worry about economic challenges, rather than environmental, social, and institutional challenges
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