BUND Evaluates Multi-Million Euro Grants for Farmers’ Insurance Programs: Latest Updates from Germany and Beyond

Germany Grapples with Urgent Need for Expanded Agricultural Insurance

berlin – Germany’s agricultural sector is confronting mounting challenges from extreme weather events, prompting calls for a nationwide overhaul of its insurance system.Experts are increasingly critical of the current patchwork of regional programs, highlighting the need for a more robust and federally supported approach to protect farmers from growing risks.

Current System Under Scrutiny

Insurance professionals point to inconsistencies in existing country-level programs,describing some as “over-bureaucratic” or “half-hearted.” alexander Lührig, Head of allianz Agrar in Munich, notes that Bavaria currently operates the most extensive program within Germany. In 2019, Bavaria, alongside Baden-Württemberg, initiated discussions for federal funding through a Federal Council initiative, advocating for greater national involvement in financing agricultural insurance.

Bavarian Model as a Potential Blueprint

The Bavarian model allows farmers to select tailored insurance packages based on their primary agricultural activities, covering perils such as hail, storms, heavy rainfall, frost, and drought. It also extends to damage caused by wildlife and seed quality issues. This flexible approach is seen as a potential starting point for a national framework.

germany Lags behind European Counterparts

several European Union nations,including France,Italy,Spain,and Poland,have long-established systems of state-subsidized multi-risk insurance. These countries typically cover approximately 70 percent of insurance contributions, creating a significant safety net for farmers. Ulrich Stephan, Head of Allianz company buisness, emphasizes that Germany must align with this international standard.

The German Farmers‘ Association is demanding at least 50 percent coverage of insurance premiums for risks like late frost, heavy rains, drought, and storms, reflecting the escalating financial burden on producers.

Climate Change Amplifies Agricultural Risks

The escalating threats to agriculture are directly linked to climate change. Warmer temperatures do not automatically translate to improved conditions for farmers; instead, they amplify existing risks. According to the Bauernverband General Secretary Sabet, extreme weather events – including hail, prolonged droughts, and intense rainfall – are increasingly jeopardizing harvests.

Vulnerability of Fruit and viticulture

Fruit and viticulture are especially susceptible to these changes. Allianz-Agrar board member Lührig explains that rising winter temperatures cause plants to come out of dormancy prematurely, making them vulnerable to late frost damage.This phenomenon presents a significant threat to annual yields.

Persistent Drought Conditions

A largely overlooked risk is the ongoing issue of persistent drought. Data from the Jülich research center reveals that soil water reserves, measured up to 60 meters deep, are significantly below historical averages, particularly in Central and Eastern Germany. Despite recent rainfall, the substantial water deficit accumulated as 2018 has not been fully replenished.

Long-Term Soil Water deficit

According to Allianz-Agrar boss Lührig, the agricultural sector experienced a substantial build-up of soil water debt in 2018, a deficit that largely persisted until 2024. This prolonged dryness is prompting discussions about potential restrictions on water usage.

Frank Herrmann, a scientist from the Jülich research center, notes that some regions are already experiencing difficulties securing water rights for agricultural purposes, as water law approval procedures become more stringent.

Country	State Contribution to Insurance
France	~70%
Italy	~70%
Spain	~70%
Poland	~70%
Germany (Current)	Varies by region, limited federal support

Did You Know? Several EU countries view agricultural insurance as a critical component of food security and economic stability, justifying substantial state investment.

pro Tip: Farmers should proactively assess their risk exposure and explore available insurance options, even if they are currently limited.

Is Germany prepared to adapt its agricultural policies to address the escalating impacts of climate change? What role should the federal government play in supporting farmers facing unprecedented risks?

Understanding Agricultural Insurance

Agricultural insurance is a risk management tool used by farmers to protect against financial losses caused by unforeseen events. These events can include natural disasters like droughts, floods, hail storms, and disease outbreaks. Effective agricultural insurance programs not only protect individual farmers but also contribute to the overall stability of the food supply.

The scope of coverage can vary significantly. Multi-peril crop insurance, such as, protects against a range of natural hazards, while single-peril policies cover specific risks like hail damage. The level of government support also differs widely across countries, with some offering substantial subsidies to encourage participation.

Frequently Asked Questions

• What is agricultural insurance? Agricultural insurance protects farmers against financial losses from events like droughts and floods.
• why is agricultural insurance important? It helps stabilize farm incomes and ensures food security.
• What is the current state of agricultural insurance in Germany? The current system is fragmented and lacks consistent federal support.
• What are other EU countries doing? Many EU countries heavily subsidize multi-risk insurance for farmers.
• How does climate change affect agricultural insurance? Climate change is increasing the frequency and severity of extreme weather events, raising insurance costs and risks.
• What is the soil water debt? The soil water debt represents a long-term deficit in underground water reserves due to repeated droughts.
• What are the potential consequences of continued drought? Continued drought could led to water restrictions for farmers and reduced crop yields.

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How can farmers’ insurance programs be designed to reward participation in agri-environmental schemes (AES)?

The Scope of the Grants & BUND’s Role

The German Federal Agency for Nature Conservation (BUND) is currently undertaking a comprehensive evaluation of multi-million Euro grants allocated to farmers’ insurance programs across Germany. These programs, largely funded through the European Union’s common Agricultural Policy (CAP) and national agricultural subsidies, aim to mitigate risks faced by farmers due to increasingly frequent extreme weather events – a direct consequence of climate change. BUND’s assessment isn’t simply about financial accountability; it’s a deep dive into the effectiveness of these insurance schemes in promoting lasting agricultural practices and biodiversity conservation.

The total value of grants under scrutiny exceeds €50 million, distributed across various regional initiatives. Key areas of focus include crop insurance, livestock insurance, and increasingly, insurance against losses due to drought and flooding.BUND’s mandate is to determine whether these financial instruments are genuinely supporting resilient farming or inadvertently incentivizing unsustainable practices.This evaluation is crucial as the CAP undergoes ongoing reforms,with a greater emphasis on environmental sustainability.

Key Areas of Evaluation: What BUND is Examining

BUND’s evaluation isn’t a monolithic process. It’s broken down into several key areas, each with specific metrics and assessment criteria. These include:

* Risk Coverage Adequacy: Are the insurance programs adequately covering the risks farmers actually face in their specific regions? this involves analyzing historical weather data, crop yields, and livestock losses.

* Incentive structures: Do the insurance schemes inadvertently encourage farmers to continue with high-risk, environmentally damaging practices? For example, does insuring against drought encourage continued reliance on water-intensive crops?

* Accessibility & Equity: Are the insurance programs accessible to all farmers, including small-scale and organic farms? Often, smaller farms struggle to meet the administrative requirements or afford the premiums.

* Environmental Impact: What is the overall environmental impact of the insured agricultural practices? Are they contributing to biodiversity loss, soil degradation, or water pollution?

* Openness & Accountability: Is the grant allocation process transparent and accountable? Are there clear mechanisms for monitoring and evaluating the effectiveness of the programs?

regional Variations & Case Studies in Germany

the impact of these grants, and thus BUND’s evaluation, varies significantly across Germany’s agricultural regions.

* Bavaria: Focus is on drought insurance for hops and barley farmers, with BUND examining whether this encourages continued monoculture farming.

* North Rhine-Westphalia: Emphasis on flood insurance for arable land, raising questions about the long-term sustainability of farming in flood-prone areas.

* Brandenburg: Evaluation of livestock insurance schemes, particularly concerning the impact on intensive livestock farming and its associated environmental problems.

* baden-Württemberg: Assessment of fruit orchard insurance, with a focus on the use of pesticides and their impact on pollinator populations.

A recent case study in the Mecklenburg-Vorpommern region highlighted a program where insurance premiums were heavily subsidized for conventional wheat farmers, while organic farmers received minimal support. This disparity raised concerns about equity and the potential for distorting the market.

Beyond Germany: International Comparisons & Best Practices

BUND isn’t operating in a vacuum. The evaluation is informed by international best practices in agricultural insurance and risk management. Comparisons are being drawn with programs in:

* france: France’s state-backed agricultural insurance system, FranceAgriMer, offers a comprehensive range of coverage, but has faced criticism for its complexity and potential for moral hazard.

* Spain: Spain’s focus on drought insurance in arid regions provides valuable lessons about the challenges of insuring against climate-related risks.

* The Netherlands: The Dutch approach to water management and flood insurance offers insights into proactive risk mitigation strategies.

* India: The Pradhan Mantri Fasal Bima Yojana (PMFBY) scheme, India’s national crop insurance program, provides a contrasting example of the challenges of implementing large-scale agricultural insurance in a developing country context.

These international comparisons are helping BUND identify potential improvements to the German system, such as incorporating index-based insurance (where payouts are triggered by pre-defined weather indices) and promoting diversification of crops.

The Role of Agri-Environmental Schemes & Sustainable Farming

A central tenet of BUND’s evaluation is the integration of agri-environmental schemes (AES) with farmers’ insurance programs. AES provide financial incentives for farmers to adopt environmentally kind practices, such as organic farming, agroforestry, and the creation of wildlife habitats.

The question is: can insurance programs be designed to reward farmers who participate in AES? For example, could farmers who adopt organic farming practices receive lower insurance premiums, reflecting their reduced reliance on synthetic pesticides and fertilizers? This would create a positive feedback loop, incentivizing both sustainable farming and risk reduction.

benefits of Effective Farmers’ Insurance Programs

When designed and implemented effectively, farmers’ insurance programs can offer meaningful benefits:

* Enhanced Food Security: By protecting farmers from financial losses, insurance programs can definitely help ensure a stable