Tropentag, September 11 - 13, 2024, Vienna "Explore opportunities... for managing natural resources and a better life for all"

Agriculture a risky business: Risk transfer solutions as a cornerstone for resilient agri-food systems?

University of Hohenheim, Germany

Abstract

Agricultural production is prone to a multitude of risks, including natural hazards, pests and diseases as well as political risks. Climate change is aggravating most of these risks, jeopardising food security.

Suitable adaptation strategies to climate change for the agricultural sector are, hence, indispensable. In the last decade agricultural research has focused on adapted production systems, incorporating new crop types, improved crop varieties, fertilisation, soil and pest management. Underdeveloped, however, remain risk transfer instruments, especially in the tropics and subtropics. They transfer risks of substantial economic impact on farm, village or regional level to third parties like insurances or funds. Ag economic research in the tropics and subtropics has dealt with this topic only sporadically; hence, more research is needed.

During the latest UN climate change conferences, the need for risk transfer instruments was acknowledged by various stakeholders. In consequence, first initiatives and instruments like the “Loss and Damage Fund” and the “Global Shield against Climate Risks” were launched internationally at COP 28 in 2023 and at COP 27 in 2022 respectively. The big challenge of these initiatives is the implementation of concrete risk transfer instruments on supranational, national and regional level. A contractual framework with clear procedures and legally proof regulations has to be developed and implemented. For instance, covered production/items, monetary values, geographical scope and indemnification mechanisms have to be defined. Such instruments will have great relevance for risk management in agriculture, especially in the context of smallholders with limited access to commercial risk transfer solutions.

Against these developments, the presentation aims to provide an overview about presently applied and potential risk transfer concepts and their respective instruments to cover the agricultural production (crops, grassland, livestock, agroforestry) and infrastructure (buildings, machinery, equipment, fences). The potential of new technologies like remote sensing and modelling will be critically assessed.

Keywords: Agriculture, funds, insurance, risk management, risk transfer instruments

Contact Address: Joachim Herbold, University of Hohenheim, 70593 Stuttgart, Germany, e-mail: drjoachimherboldoutlook.de