So farmers are increasingly turning to alternative risk financing approaches to supplement and complement their conventional insurance arrangements. In doing so, not only do they have the opportunity to better manage their risk, they can also build more sustainable and cost-effective operations in the long run.
Risk financing policies allow for the funding of risks not feasibly covered by traditional policies. They provide a focal point for continuous risk improvement and risk mitigation, with the aim of improving sustainably and reducing the overall risk profile of the farming operation.
A key aspect of such approach is for the farmer to embark on an individually tailored long-term retention programme that is based on sound risk management principles, practices and strategies in farming activity.
This is then coupled with efficient funding solutions to facilitate the gradual build-up of reserves, which allows for the funding of risks in a sustainable and cost-effective manner over the long term.
An individual assessment is needed to determine a farmer’s risk profile and risk appetite. This is key to establishing the feasibility and sustainability of their retention programme.
Where individual farmers are not large enough to meet the minimum criteria for a retention programme, they can consider pursuing such a funding approach, on a collective, mutual basis with other farmers in their area who share similar activities, values, objectives and standards.
The larger the build-up of the reserve retention, the more effective the programme becomes in reducing the farmer’s risk profile and cost of risk.
To find out more about how risk financing insurance solutions can work for your Agri clients, please contact Basil Valsamakis, Hollard Insure’s general manager for risk finance, on firstname.lastname@example.org.