Agricultural Risk Management and Insurance

Abstract

Risk management in agriculture can be described as the art and science of choosing among alternatives aimed at reducing the adverse effects of foreseen and unforeseen variability in the production process. Because agriculture is a biological activity, the practice is prone to risks and uncertainty. The need is urgent and cogent to continue to draw attention to the risky nature of the practice of agriculture and thereby proffer effective risk management strategies. This chapter therefore focuses on the basic concepts of agricultural risk management and insurance as they relate to agricultural finance and enterprise expansion. The discussions are based on a review of relevant literature. The chapter concludes that granted that the practice of agriculture is a private sector activity, the need for institutional support, especially in the area formal agricultural insurance schemes, cannot be overemphasized. It is recommended that relevant institutions involved in agricultural insurance as a formal risk-management strategy should ensure that famers obtain due compensation for their insured enterprises in the event of the relevant catastrophe in the farm enterprise.