Insurances in agriculture
Weather extremes such as drought, intense rainfall, hail and frost, price fluctuations on sales and procurement markets, livestock diseases and epidemics – all these constitute risks for farms. Risk management systems are to minimize potential damages and losses. In Austria, subsidies for insurance premiums and compensation for damages, such as crop losses resulting from poor weather conditions, are some of the risk management measures financed by the Federation and the provinces.
Today, the Austrian Court of Audit (ACA) published the report "Public Risk Management for Agriculture" and ascertains the following: the Austrian Hail Insurance (Österreichische Hagelversicherung) determines to a considerable extent the insurable agricultural crops and risks as well as the premium amounts.
From 2014 to 2018, the payments made by the Federation and the provinces for grants for insurance premiums increased by 57 per cent, namely from EUR 39.64 million to EUR 62.07 million. One of the reasons for this was the extension of the grants for insurable risks decided in 2016, such as the grants for drought damages, and the conclusion of additional insurance contracts related thereto. The ACA’s auditors state the following: in the programme period 2014 to 2020, the Federal Ministry of Agriculture did not use any EU funds for the subsidising of insurance premiums in agriculture. In this regard, the ministry pointed to the high level of administrative and control effort. The ACA notes that a higher administrative burden also entails higher transparency and a standardized control system. Furthermore, the use of EU funds could have resulted in a reduction of the funds paid by the Federation and the provinces. The ACA therefore recommends to the Federal Ministry of Agriculture to consider the use of EU funds for the subsidising of risk prevention measures in agruculture for the programme period 2021 to 2027.
Lacking audit competence of the ACA
Since 1955, only the Austrian Hail Insurance has fulfilled the statutory requirement to offer nationwide insurances that are eligible for subsidies. Consequently, only the Austrian Hail Insurance acted as the processing entity in the audited period 2014 to 2018. The ACA criticizes that the processing of the subsidies gave rise to conflicts of interest. The reason: as the processing entity, the Austrian Hail Insurance had to ensure that the processing of the subsidies for insurance premiums was legally compliant. At the same time, it was also the provider of the discounted insurances and had an economic interest in the conclusion of the insurance contracts. Furthermore, it determined the insurance conditions and the premium amounts. With the extension of the insurable risks from 2019 on, two other insurance companies have acted as processing entities in the area of livestock insurance in addition to the Austrian Hail Insurance. The ACA did not have any audit competence for the activities of the processing entities. The Subsidies for Hail Insurance Act (Hagelversicherungs-Förderungsgesetz) did not provide any audit rights for the ACA either. The auditors therefore recommend to the Federal Ministry of Agriculture to encourage, in case of a possible amendment of the Subsidies for Hail Insurance Act, the inclusion of a provision that enables the ACA to audit the processing of the subsidies by the processing entities.
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Report: Public Risk Management for Agriculture (in German)
From June to October 2019, the ACA audited the public risk management for agriculture. The audit aimed at assessing the legal bases, the objectives and the legal framework conditions of the public risk management for agriculture, of the subsidies for insurance premiums, of aid measures in the case of damages and of the subsidising of advisory services and training related to risk prevention and management. The audited period essentially spanned the years from 2014 through 2018.