1. Risk management in rural development policy Brussels, 16 October 2018
Christian Vincentini
DG Agriculture and Rural Development
European Commission

2. Outline
1. Why a Risk management toolkit? 2. Current state of play of the Risk Management 3. Flash on Risk Management towards floods

3. Why a Risk management toolkit?

4. Why a Risk Management toolkit for farmers?
Farmers are increasingly exposed to threats to their business outside their direct control, for example:
Price volatility
Extreme weather events affecting yields
These risks can affect the economic viability of a farm.
In extreme cases, a competitive farm could be forced out of business due to an external effect.
An increased level of economic uncertainty negatively affects the farmer's willingness to invest in sustainable business development.
Need to cover economic losses caused by external market effects or weather events. 4

5. CAP risk management instruments
Direct payments -
Market measures
CMO wine and fruits and vegetables:
Insurance premium subsidy
Mutual funds
SCMO (wine and fruits and vegetables):
Rural development
Articles 68, 70, 71 of Reg. (EC) No 73/2009:
Insurance premium subsidy
Mutual funds
1. Article 20(b)(vi) of Reg. (EC) No 1698/2005
1. Article 18 of Reg. (EU) No 1305/2013
2. Articles 36 – 39a Reg. (EU) No 1305/2013:
Insurance premium subsidy
Mutual funds
Income stabilisation tool
Sectorial Income stabilisation tool

6. Article 18 of Reg. (EU) No 1305/2013 (Measure 5)
Restoring agricultural production potential damaged by natural disasters and catastrophic events and introduction of appropriate prevention actions
Measure 5.1: Investments in preventive actions
to reduce the consequences of probable natural disasters, adverse climatic events and catastrophic events
Measure 5.2: Investments for restoration of agricultural production potential*
damaged by natural disasters, adverse climatic events and catastrophic events
Formal recognition of the competent authority
Beneficiaries: farmers, groups of farmers, public entities.
* Destruction of at least 30% of the relevant agricultural potential.

7. Article 37 of Reg. (EU) No 1305/2013 (Measure 17.1)
Insurance Premiums
Financial contributions
to premiums for crop, animal and plant insurance
against production losses of farmers going beyond 20%* of the average annual production**
caused by adverse climatic events, animal or plant diseases, pest infestation, or an environmental incident.
* The tool is not Green Box compatible, therefore it will be notified as an Amber Box scheme.
** in the preceding three-year period or a three-year average based on the preceding five-year period excluding the highest and lowest entry.

8. Article 38 of Reg. (EU) No 1305/2013 (Measure 17.2)
Mutual funds
Financial contributions
to mutual funds
which pay financial compensations to farmers
for production losses going beyond 30% of the average annual production**
caused by adverse climatic events or by the outbreak of an animal or plant disease or pest infestation or an environmental incident.
** in the preceding three-year period or a three-year average based on the preceding five-year period excluding the highest and lowest entry.

9. Article 39 of Reg. (EU) No 1305/2013 (Measure 17.3)
Income Stabilisation Tool
Support shall only be granted to mutual funds
which provide compensation where the drop of income
exceeds 30% of the average annual income of the individual farmer**.
Payments by the mutual fund to farmers shall compensate for less than 70% of the income lost in the year the producer becomes eligible to receive this assistance.
** in the preceding three-year period or a three-year average based on the preceding five-year period excluding the highest and lowest entry.

10. Article 39a of Reg. (EU) No 1305/2013 (Measure 17.3)
Sectorial Income Stabilisation Tool
It aims at targeting farmers in specific agricultural sectors.
Main differences between the general IST and the sectorial IST:
the sectorial IST targets farmers of a specific sector;
a sound justification of the reasons behind the implementation of the instrument should be provided;
the sectorial IST is activated by a drop in the average annual income of the farmer that exceeds 20%*.
* The tool is not Green Box compatible, therefore it will be notified as an Amber Box scheme.

11. Current state of play of Risk Management

12. State of play
Total public expenditure programmed on RM across all RDPs: € 4,6 bn out of € 121 bn
 3,81% of the total public budget programmed
€ 2,1 bn for Measure 5 (1,73%)
€ 2,5 bn for Measure 17 (2,09%)
Insurance premia: 2,24 bn€
Mutual funds: 167 M€
IST: 116 M€
€ 2,1 bn
€ 2,5 bn
Within the risk management tool kit, the insurance schemes (M17.1) are therefore more popular than schemes involving mutual funds (M17.2 and M17.3).

13. State of play Measure 17 Italy 7,34% France 3,66%
of total public expenditure
Croatia, Hungary, Malta, the Netherlands*: some 2%
Portugal, Romania, Lithuania, Latvia: about 1%
* National top up

14. State of play Measure 17
Overall uptake: 11 out of the 28 Member States. At RDP level, 13 programmes out of 118
 PT - Açores, Continente and Madeira

15. State of play Measure 5 Germany 8,64% Croatia 3,95% Slovakia 3,33%
Poland 2,31%
of total public expenditure

16. State of play Measure 5
Overall uptake: 14 out of the 28 Member States. At RDP level, 48 programmes out of 118
 IT-16, FR-10, DE–6, ES-4, PT–3, UK-1,
DK, EE, GR, HU, HR, LV, PL, SK

17. Risk Management in Rural Development - Overview
Measure 17
Total public expenditure (€)
17.1
17.2
17.3 IT X FR HU RO NL PT HR LT LV BE MT
EU28
Measure 5
Total public expenditure (€)
5.1
5.2 DE X PL IT HR SK GR PT HU ES FR UK LV EE DK
671
EU28

18. Rural Development Risk Management in EU
Heterogeneous implementation of risk management instruments* across the EU, depending on
level of public support
species
risk
complexity of the instrument
However, over the last decade the use and availability of risk management instruments has increased.
Study on risk management in EU agriculture
* In this case, we are talking about the implementation of all EU instruments, not only those supported by EU Funds.

19. Rural Development Risk Management and Floods
Floods are considered as infrequent and often catastrophic events.
Insurance companies
Farmers
Within the agricultural sector, the insurance companies often do not cover systemic risks, i.e. floods, quarantine pests in Romania.
 Intention to implement mutual funds
The rural development policy can support risk management instrument to cope with floods
however, the participation of Member States and farmers is not mandatory
In approximately one-third of the Member States, a gap is identified with respect to climate risks. Mostly drought, and to a lesser extent flooding, are excluded from the insurance cover or only partly included.

20. Rural Development Risk Management and Floods
To be introduced within an RDP, a risk management instrument needs to be
Appropriate
Relevant

21. Thank you