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Textos: Antonio Fernández Toraño.
Desing and layout: Tactics Europe.
Printed by: Runiprint S.A.
Legal Deposit: M-31261-2010
1980-2009
The Spanish agriculturalinsurance system
30 YEARS OF HISTORY
Antonio Fernández TorañoPresident of AGROSEGURO, S.A.
The year 2005 marked the 25th anniversary of the creation of AGROSEGURO, the
manager (in the name and on behalf of the insurance companies of the co-insurance
pool) of a large part of all matters related to insuring weather-related risks that affect
almost all types of vegetable productions in our country and many of those risks which
affect livestock farming. Twenty-five years is always a symbolic and traditional milestone.
Thus, we celebrated it with, amongst other things, the publication of the book
“AGROSEGURO. The story of a great adventure”.
Now, in 2009, it has been thirty years since the start of that great adventure. It is another
“milestone” date during which, this time, we are commemorating the creation of an
Agricultural Insurance System. This is a System that, with the rewards and challenges
that all human work entails, has reached significant maturity and sufficient experience
which is worth recounting, placing data, figures and analyses at the disposal of those
who are interested in learning more about it. This System has proven to be notably
effective as an instrument of relief for financial damages that affect agricultural activity
as a result of its exposure in the peninsular and insular areas to three different kinds of
climates: Atlantic, Continental and Mediterranean.
And that is the purpose of this work: to show the System's evolution since 1980 through
the use of figures and information.
Because since a date that today may seem far away, but actually is not, Spanish society
has experienced events of paramount importance for the country and for our individual
and collective mentality: a Constitution was approved in 1978 (year the actual Combined
Agricultural Insurance Act was approved) that has been paving the way towards an
increasingly faster development of what is known as the “State of the Autonomous
Communities”, which entailed administrative decentralisation and a constant need for
co-ordination in order to prevent asymmetries and imbalances within the State; in 1986
we entered, together with Portugal, what was then the European Economic Community,
which for a while was known as the Europe of the Twelve, a number that has now risen
to twenty-seven. In short, significant economic development has been achieved, largely
as a result of our membership in that European Economic Area, which helped our
economy become the world's eighth largest economic power.
During this very intense period of time, the Spanish insurance industry has been able
to appropriately respond to the business challenges that have arisen through a significant
process of modernisation, restructuring and concentration. This process has been favoured
in part by the new demands that our status as a member of the EEC imposed on us.
Thus, in 2009, the Spanish insurance sector reached sixth place in Europe, with almost
60 thousand million euros in premiums, of which almost 53% (31.7 thousand million
Foreword
Antonio Fernández TorañoPresident of AGROSEGURO, S.A.
euros) came from non-life insurance. Within that section, the Agricultural Insurance
System provided a premium volume of nearly 650 million euros during that year, i.e.,
2.04%, occupying in Spain a hypothetical position around seventeen in the insurance
ranking by volume of non-life premiums.
Today, with regard to the questioning by experts in these matters (agricultural insurance
co-financed by the public administrations vs. agricultural insurance financed exclusively
by the insurance companies) of the effectiveness of systems which, like both the North
American and Spanish systems, apply (as they have for some time now) the public-private
partnership formula, it must be categorically stated that, at least the Spanish System,
with all its imperfections (which it undoubtedly has), is effective and useful for society.
If effectiveness is understood as attaining the maximum output with the lowest cost,
reaching the highest possible number of beneficiaries, it must be said that this System
meets those requirements: it handles a premium volume of close to 650 million euros,
of which approximately 44% is paid by the agricultural and livestock farmers for which
the System is designed, thus generating for the State a “savings” of financing for
agricultural activity in that amount; the indemnities paid for damages suffered due to
weather-related events regularly exceed that 56% put in by the State, but stabilise the
income of the agricultural and livestock farmers that make a living from these activities;
the pool of insurance companies is managed by AGROSEGURO, a private company in
90% of its share capital, with an average of 3.5%-4% of the premiums, thanks to the
co-insurance formula that generates large economies of scale and makes it possible for
the insurance companies to freely join the System and choose the percentage of total
risk they are willing to assume each agricultural season; it generates very important
insurance company-insured party brokering carried out by agents related or not to the
insurance companies involved, insurance and re-insurance brokers specialised in this field
of insurance activity, and agricultural organisations that have finally assumed a very
important role when guiding and advising the possible insured parties as they select their
cover, a job for which they also receive a business commission when they act as legally-
recognised insurance brokers; lastly, the System covers almost all of the country's vegetable
productions, an increasingly large part of the risks that affect the livestock productions
and aquaculture-related productions. It has also begun to offer its protection to forestry
productions.
In other words, once again, the System provides maximum output with the lowest
possible cost and the best use for all parties involved. It also relieves the public
administrations of the tasks and costs which they would actually incur if there was no
instrument as adaptable and affordable as insurance, in this case, agricultural insurance,
whose performance and evolution over the last thirty years we detail next.kkkkkkkkkkk
A project of this magnitude requires the collaboration of many. The purpose of these
lines is to express our gratitude and acknowledge all those who have dedicated even
just a few minutes towards achieving the final aim of this work: to present the evolution
of the Agricultural Insurance System over the last three decades through the use of
figures and information.
However, I would like to give particular thanks to Juan Quintana and Soledad de Juan
Arechederra for the enthusiasm and professionalism with which they took on the task
of organising and piecing together the information as it was being gathered, as well as
for the vision they have been conveying to us of the overall picture they were gradually
laying out before our eyes; to Alicia Langreo Navarro and Isabel Benito García for the
magnificent analysis of the evolution of our agricultural sector over the last thirty years,
covered in the first chapter of this work, thanks to which we can better appreciate the
role played by insurance during this same period; to Ángel Paz de las Heras who, working
from AGROSEGURO with his in-depth knowledge of the factors that have contributed
and still contribute to the day-to-day operation of the System, knew how to make the
most of the available information through comments and notes that enhance the main
chapters; to Carlos Álvarez Garrido, who together with Ángel has coordinated and
supervised the figures, data and actual structure of this work; and to all the other
professionals of the Entity who have also contributed to the preparation of various tables
and analyses. In any case, these people have been the most visible representation of all
those in this Company who have offered their knowledge and firm support to the
completion of this project that we offer to all those who want to better understand the
Spanish Agricultural Insurance System.
We sincerely thank and congratulate all of you on a job well done.
Acknowledgements
1. EVOLUTION OF THE AGRICULTURAL SECTOR INSPAIN SINCE 1980 .............................................. 9
1.1 THE BEGINNINGS .................................... 11
1.2 THE NINETEEN EIGHTIES:ENTRY INTO THE EUROPEANECONOMIC COMMUNITY. ...................... 13
1.3 THE NINETEEN NINETIES: THE START OFEXTENSIVE REFORMS IN COMMUNITYAGRICULTURAL POLICY .......................... 15
1.4 THE FIRST DECADE OF THE 21STCENTURY ................................................. 19
1.5 EPILOGUE ............................................... 22
2. THE SPANISH AGRICULTURAL INSURANCE MODEL.STRUCTURE. MILESTONES ................................. 25
2.1 BRIEF SUMMARY OF THE HISTORY OF AGRICULTURAL INSURANCE IN SPAIN ...... 26
2.2 STRUCTURE OF THE AGRICULTURALINSURANCE SYSTEM ................................ 27
2.3 MILESTONES IN THE EVOLUTION OF THESYSTEM CREATED IN 1978 ....................... 35
3. INSURED PRODUCTIONS ................................... 41
3.1 FAMILIES OF LINES AND LINES OF INSURANCE. EVOLUTION AND TIMELINE .. 43
3.2 INSURED AGRICULTURAL AREA ANDPRODUCTION ........................................... 44
3.3 INSURED ANIMALS ................................... 53
3.4 INSURANCE FOR THE COLLECTION AND DISPOSAL OF DEAD FARM ANIMALS (C&D) ....................................... 57
4. SUBSIDIES FOR INSURANCE PRICES ................... 59
4.1 ENESA - SPANISH AGRICULTURAL INSURANCE ENTITY ................................. 60
4.2 AUTONOMOUS COMMUNITIES ............... 62
4.3 THE TOTAL SUBSIDY FOR INSURANCECOST COMPARED WITH PREMIUMS ........ 64
Contents
5. PURCHASING AND DISTRIBUTION ..................... 69
5.1 PURCHASING AGRICULTURAL INSURANCE ............................................. 70
5.2 PURCHASING OF INSURANCE BY TYPEOF HOLDER .............................................. 80
5.3 DISTRIBUTION OF AGRICULTURALINSURANCE ............................................. 84
6. ASSESSMENT OF DAMAGES AND LOSS ............ 87
6.1 EVOLUTION OF THE EXPERT NETWORK .... 89
6.2 APPRAISAL ............................................... 91
6.3 CLAIMS..................................................... 93
6.4 THE BIGGEST LOSSES IN THE SYSTEM'S ...... HISTORY .................................................. 99
6.4.1 Hail ................................................. 99
6.4.2 Frost ............................................. 102
6.4.3 Drought ........................................ 106
6.4.4 Wind ............................................ 108
7. R&D&I IN AGRICULTURAL INSURANCE ............ 111
7.1 IDENTIFICATION OF INSURED RISK. DETERMINING DAMAGE ........................ 112
7.2 ISOLATION AND CHARACTERISATION OF SYNTHESIZED PROTEINS IN RESPONSE TO FROST IN FRUIT TREE SPECIES ................ 114
7.3 FRUIT TREE PRODUCTION POTENTIAL METHOD ................................................. 115
7.4 SATELLITE MEASUREMENT OF THE VEGETATION INDEX ............................... 117
8. PROTECTION FOR INSURED PARTIES ................ 121
8.1 CUSTOMER SERVICE .............................. 124
8.2 CUSTOMER OMBUDSMAN .................... 125
8.3 SATISFACTION SURVEYS ........................ 126
9. EPILOGUE ....................................................... 130
10. TABLES AND GRAPHS ................................... 131
1 Evolution of the agriculturalsector in Spain since 1980
10
In the period since 1980, Spanish agriculture has undergone
radical changes: nowadays it is more appropriate to talk
about a food system in which agriculture is the first phase
and whose products are passed on to the consumer, via
industry and trade, as food.
The greatest changes that have taken place during this era
can be grouped into two large blocks:
• External changes caused, on the one hand, by political
and institutional changes experienced in Spain, and on
the other, by social and economic changes.kkkkkkkk
• Changes in the sector itself and in agricultural policy.
The finalisation of the Spanish political transition is a
noteworthy element of the first of these blocks, as are the
consolidation of democracy, the emergence from the crisis
of the 1970s and the joining of the then European Economic
Community (EEC); the formation and implementation of the
State of Autonomous Communities; transformations within
the European Community, which is now the European Union;
the economic growth from the 1990s up until the current
crisis; greater participation of women in economic activity;
changes in consumer habits; the huge numbers of
immigrants and changes in population, which have
aggravated desertification; and the ageing of the inland area
of the Iberian Peninsula.
The opening up and increase of foreign trade within the
European and global framework are part of the second block,
along with changes in the food system, in which retail
distribution is taking over; rising verticalisation; globalisation
of leading companies; changes in the way we perceive food;
the role of advertising; changes in consumer habits;
technological developments, etc. One fundamental issue is
agriculture's loss of weight and influential ability in society
and within the food system itself. On the other hand, the
sudden burst of emerging countries on to the global food
scene is also an issue, both in terms of producer quality as
well as consumers and the major changes in their diet.
Furthermore, agricultural policy has gone from being national
and centrally managed to being integrated into the Common
Agricultural Policy (CAP) of the European Union and
managed, and to a large extent decided, by the autonomous
communities. We have gone from an interventionist policy,
aimed at protecting European agriculture, to the development
of strategies for limiting productions and with that,
expenditure in the sector; from supporting productions to
directly supporting income; from a preference for the
Community to an increased opening-up to global trade; from
support for productions as a basic philosophy to concern for
the environment, rural development and animal welfare.
During the last decade, food safety policies have finally come
into play. They have become a key factor of public action
within the sector and of territorial cohesion activities, which
directly affect the rural world. Lastly, we are witnessing the
growing connection of agriculture with the production of
biofuels and the rural environment, with the growth of solar
and wind farms, and with the energy sector, upon which
agriculture is increasingly dependent due to oil products.
As a conclusion to this discussion, it is necessary to mention
the effects of the economic and financial crisis (which began
in 2007 with the raw materials crisis) on the world food
system. The concern that the people of developed and
emerging countries have regarding the availability of sufficient
food is quite possibly reversing certain political stances on
11
When the current Agricultural Insurance System was
founded in 1980, the Spanish agricultural sector was
undergoing profound changes caused by the transition to
democracy. These were in addition to the serious
modifications the sector had been experiencing since the
1960s, which consisted of a process aimed at modernising
and creating a structure more similar to that of our
neighbouring countries. From the post-war years of rationing
to 1980, shortly after the Constitution was approved and
the first democratic elections were held, the agricultural
sector experienced profound changes: the decrease of the
agricultural working population and the large waves of
migration that depopulated a large part of the inland area
of the Iberian Peninsula, agricultural mechanisation, the
increase in consumption of both inputs and outputs, the
development of intensive livestock farming, the boom in
export-led sectors such as the orange sector, the increase in
domestic consumption, the growth of foreign trade, the
implementation of agricultural social security, etc. As regards
agricultural policy, around the year 1960 the Agricultural
Expansion Service (Servicio de Extensión Agraria) was
established, which played a significant role in the training
and modernisation of farmers. Throughout the 1960s and
1970s, legal structures were changed, irrigation was increased
and, between the end of the 1960s and the beginning of
the 1970s, a legislative package brought the management
of markets closer to the models of European Community
countries, emphasising the creation of the FORPPA (Fund for
the Management and Regulation of Agricultural Products
and Prices), the new role of the National Agricultural Products
Service (SENPA) and the new way of regulating markets.
These changes lay within the framework of the in-depth
modification of the economic policy and development plans,
which also provided significant support to the food industry
and helped develop cooperatives for supplies, wines and oils,
amongst others.
1.1 The Beginnings
agriculture and on the food system in general, as has already
been seen from the relevance that the Food and Agriculture
Organization (FAO) summits are regaining. In light of these
circumstances, the debate on the need for a new green
revolution capable of increasing global food production has
been brought back to the table, which could collide with the
environmentalist view that predominates in the wealthiest
countries.
The arrival of democracy (1976-77) and the economic pacts
to help face the crisis that spanned the country were the
Framework for the development of the agricultural sector
during the first years of the transition. At that time, the
market policy had become the main focus of talks between
the government and the new representative structure for
farmers and industries that had replaced the vertical Trade
Union and which was gradually replacing the agricultural
chambers (Cámaras Agrarias) in the various government
bodies.
In 1980, when the Agricultural Insurance System began its
activity, the agricultural sector had joined forces with all of
society in a combined effort to tackle the economic crisis
and lower inflation that was above 20% and which was
threatening to block the economy and with it the new State,
as was expressed in the Moncloa Pacts. That was the year
that the Ministry for Agriculture became the Ministry for
Agriculture, Fisheries and Food, a decision which highlighted
the intention to consider the food system as a whole, into
which industry and trade networks were integrated as
essential activities. In practice, this integrated view of the
whole system is only now starting to become a reality.
It was also around that year that certain laws of utmost
importance for the sector were passed: the Agricultural
Insurance Act (Ley de Seguros Agrarios - 1978), which was
the first law passed in democratic Spain and had the backing
of the entire Parliament; the Visibly Improvable Farms Act
(Ley de Fincas Manifiestamente Mejorables - 1979); and the
Rural Lease Act (Ley de Arrendamientos Rústicos - 1980),
whose effectiveness, just like many other structural policies,
was limited, as was analysed much later in the White Paper
on Agriculture and Rural Development (Libro Blanco de la
Agricultura y el Desarrollo Rural - 2003).
In 1980, Spain was still a very agricultural country, with 17%
of the working population engaged in agricultural activities,
despite the fact that the agricultural sector only accounted
for 6% of final production. It was also at that time that
certain agricultural sectors found themselves involved in the
great chapters of Spanish exportation, as was the case with
citrus fruits, winter fruits and vegetables and oil. The food
industry was already an important part of Spanish industry.
In 1982, the Agriculture Census highlighted the existence of
2,375,327 agricultural farms, a mere 0.8% less than in 1972.
The vast majority of these farms were extremely small: 26%
were smaller than one hectare, 62% were smaller than five
hectares and only 4.9% were bigger than fifty hectares.
Given these circumstances, it was certain that most of the
farms were of the size that placed them below the profitability
threshold.
In 1980, farmland had reached 20.5 million hectares and
remained more or less stable throughout the following
decade. Irrigated land accounted for 13.8% of all farmland,
a percentage that rose by 1% in the following decade. As
for the shares of the various crops, arable crops accounted
for 52% with fallow and unoccupied lands and woodlands
accounting for 24% each. The high level of development
reached by intensive livestock farming and the horticultural
sector is of special note.
In the year AGROSEGURO was created, final agricultural
production was 1,855,667 million pesetas, 56% of which
corresponded to the agricultural subsector and 36.3% to
livestock, while the remainder was accounted for by forestry.
The contributions of meat produce (25.3%), fruit and
vegetables (22.4%), cereals (12.3%), dairy products (8.9%),
wine (5.8%) and oil (3.6%) are also worth noting.
In that same year, total agricultural exports reached 300,000
million pesetas, compared with 350,000 for total imports,
with a clearly negative balance.
12
13
During the first half of the decade, the transition to
democracy had been finalised and, following the Moncloa
Pacts, the economic indicators had begun to improve. During
this time, Spanish agricultural policy decided to dissolve what
was left of autarkic politics (absorption of the General
Commissariat for Supply and Transport (CAT) by SENPA
(National Agricultural Products Service), elimination of the
mandatory handing over of wheat, elimination of the
National Tobacco Service, elimination of forms of state trade
for agricultural and food products, etc.) and prepare the
sector for entry into the then European Economic Community
(EEC).
Certain acts of particular note were passed during the first
half of the decade: the Family Farms and Young Farmers
Statute (Estatuto de la Explotación Familiar Agraria y de los
Jóvenes Agricultores - 1981), Purchasing of Agricultural
Products Act (Ley de Contratación de Productos Agrarios -
1982), Mountain Agriculture Act (Ley de Agricultura de
Montaña - 1982) and the Production and Trade of Wheat and
its by-products Act (Ley de Producción y Comercio de Trigo
y sus Derivados - 1984). This last Act was directly aimed at
eliminating the mechanisms that still remained of the autarky.
The first Act had structural purposes, although it had few
actual repercussions, while the Purchasing of Agricultural
Products Act and the Mountain Agriculture Act were hardly
effective until they were linked to similar European regulations
following the entry into the EEC. The legislative activity during
the second half of the decade focused on the adaptation of
Community legislation to Spain.
During this time, the existence of a series of sectorial plans
aimed at making the production sectors more competitive is
particularly noteworthy: cotton, olives, milk, etc. The objective
of all these plans was to achieve a high number of viable
farms and entailed a medium-term strategy to increase
production.
With regard to governmental affairs, the “State of the
Autonomous Communities" was established during this
decade with the approval of most of the Statutes of the
Autonomous Communities (Estatutos Autonómicos). This
was a process which had extensive repercussions on agricultural
policy, since the latter was transferred almost in its entirety,
with market intervention, agricultural insurance policy and
the general planning and coordination of the activity falling
under the control of the central government.2222222222
Also throughout this period, the overall structure of the
agricultural organisations was further clarified. Thus, by the
end of the decade, and after several processes of merging
national organisations and changes in affiliation on the part
of certain regional organisations, the three Professional
Agricultural Organisations that have been representing the
sector since then were established: the Coordinator of Farmer
and Livestock Breeder Organisations (COAG), the Small Farmers
Union (UPA) and the Agricultural Association of Young Farmers
(ASAJA). The loss of the functions and content of the
1.2 The nineteen eighties:Entry into the European Economic Community
14
agricultural chambers (Cámaras Agrarias) contributed to the
establishment of these organisations, although problems still
continue to arise. During the second half of the 1980s, the
Confederation of Spanish Agricultural Cooperatives (CCAE)
was formed which, for all intents and purposes, replaced the
Spanish Union of Agricultural Cooperatives (UNACO) in the
dealings with the Administrations and has had a positive
impact on the modernisation of Spanish cooperatives.
Spain's entry into the EEC in January 1986 made extensive
modification necessary, especially with regard to the policy
of prices and markets and to the aid provided for the marketing
and industrialisation of agricultural products. This entry also
required the adaptation of the structural policy, although it
continued to have a very high national participation in issues
that were crucial for Spain, such as irrigation.222222222222
Before Spain joined the EEC, structural surpluses of milk,
meats, cereals, sugar, etc. had been registered in the
Community, which required a continuous increase in
Community budgets and created permanent conflicts in
international relations. As a result, the Commission
implemented a series of measures that restricted production
through quotas, allotments, intervention limitations, exportation
subsidies, etc. Meanwhile, policies had been developed in
Spain that sought to improve the farms' profitability and
necessarily led to increased production. As a result, various
Spanish sub-sectors were required to put the brakes on
expansive policies that still had more results to provide.
In the Treaty of Accession, very long transition periods were
established for Spain so that it could reach the level of prices
and freedom of movement of certain products (for example:
full aid alignment for oil production would last ten years;
seven years for poultry and “special” premiums for Spanish
sheep; a seven-year transition period for cattle and cereals;
ten years for the free movement of fruits and vegetables, etc).
These periods were shortened once the Single Market was
established in 1993.
It is worth noting that our country's entry into the EEC
facilitated the entry of large Community funds from the
European Agricultural Guidance and Guarantee Fund (FEOGA)
for the improvement and modernisation of the food industry
and the commercial networks at the source. This action had
definitive importance throughout the entire sector. Moreover,
the improvements in the industry, with high participation of
cooperatives, largely led the way for improvement in the
agricultural sector, as happened with olive oil, the meat
industries (an area in which incredible progress could be made
with the modernisation of the abattoirs), wineries, horticultural
centres, etc.
Also under the FEOGA Committees, the second half of the
1980s saw certain structural measures being applied, amongst
which the aid provided for farm improvement, which has
been quite active, and for the incorporation of youth and
early retirement are of special note. Nevertheless, despite the
efforts put forth towards the incorporation of youth, we must
acknowledge that success has been limited; it has not been
possible to slowdown the abandonment of the sector. With
regard to early retirement, the strategy of the Autonomous
Communities has conditioned this policy's success or failure,
with favourable results in very few of them. In short, these
policies have not been able to compensate for the ageing of
the sector, which is more pronounced in certain regions and
productions.
During this decade, the agricultural working population
dropped from 17% to 10%, revealing the overall loss of the
sector's weight. Along these same lines, agriculture's
contribution to final production at the end of the 1980s was
only 5%. With regard to land use, the most important
characteristic is the rise in irrigation (whose participation in
farmlands rose two percentage points) and in arable land,
while the participation of fallow lands and non-productive
lands dropped significantly and the woodlands remained the
same.
At the same time, the livestock censuses experienced very
sharp increases: cattle 14%, sheep 70%, goat 85%, and pigs
42%. The only drop was that of the dairy cattle census
(-14.2%), due to the planned application of quotas. Meanwhile
15
At the start of the 1990s, the entry into force of the
European Single Market put an end to the long adaptation
periods imposed on certain agricultural sub-sectors in Spain's
Treaty of Accession to the EEC. The cases of fruits and
vegetables and of oil are worth noting, since from that point
onwards these foods experienced a very marked increase.
The entry into force of the Single Market, which eliminated
much of the trade barriers between the member states, was
very important in the medium term for the increase in intra-
European trade. It also facilitated the creation of a European-
wide food system. On the other hand, the Structural Funds
Reform signified a sharp increase in the budgets available for
the improvement of structures and infrastructures through
the Social Fund, the European Regional Development Fund
(ERDF) and the FEOGA Committee, with a strong impact on
agriculture and Spanish rural affairs.
As regards agriculture, and always within the scope of the
EEC, the first years of the decade saw the approval of the
“MacSharry Report”, which proposed an extensive reform
of the Common Agricultural Policy (CAP), solidifying the
trends that had been emerging in previous years. Thereafter,
measures were taken that significantly changed the price
policy, separating aid (subsidies, compensatory indemnities,
1.3 The nineteen nineties: The start ofextensive reforms in CommunityAgricultural Policy
the breeding cow census rose significantly (over 85%). These
movements owed to the positive performance of intensive
pig farming and the implementation of aid for cattle, sheep
and goat farming. As a result, meat production rose an overall
30%, with a noteworthy increase of over 50% for pigs.
Total agricultural income almost doubled between 1980 and
1990, although it was still less than the average income and
the subsidies rose from 3.6% to 7.2%. In general the first
years after Spain joined the EEC were good for the sector,
despite the delay in the full accession for various products
(fruits and vegetables, oil, sheep, etc), which could not enjoy
all the advantages.
16
etc.) from the productions, as happened with cereals and oil
products. Likewise, the aid aimed at rural development was
increased, although it was still connected especially to
agriculture. In addition, a vision of this development was
introduced that extended beyond agriculture and which
manifested itself in the successive LEADER programmes. In
Spain these programmes were complemented with the
PRODER programmes, making it possible to cover a large
part of the territory. Of particular note, in this context, are
the existence of the agro-environmental measures and the
expansion of the mechanisms to support areas challenged
by mountainous terrain or depopulation, which are very
important in Spain. The Cork Conference in 1996 sought to
align the price policy with the new emerging vision of rural
development.
The MacSharry Reform had very important effects on the
herbaceous crops, since it brought domestic prices closer to
international prices and a compensatory indemnity was paid
for the loss of income that these signified. This indemnity
was related to the area and regional historical yields,
irrespective of each year's actual production. Thus, a new
philosophy emerged that limited the problems within the
scope of the international market, but introduced elements
of irrationality in the price policy and set the conditions for
its social delegitimation. Under this new philosophy, almost
all the Common Market Organisations (CMOs) were revised
throughout the decade.
Over these years, much of the legislative activity was marked
by the Commission's activity and the necessary transposition
of its rules. Some issues demanded significant changes, for
example, the quality policy had to be adapted, which in
Spain was still partially based on the distant Wine Statute
(Estatuto del Vino) of 1971. The most important Spanish
acts passed during this period were the Agri-food
Interprofessional Organisations Act (Ley de Organizaciones
Interprofesionales Agroalimentarias - 1994), which took a
long time to get started and even today is still weak, and the
Modernisation of Agricultural Farms Act (Ley de
Modernización de las Explotaciones Agrarias - 1995), which
aimed to boost the concentration of farms and foster their
modernisation, emphasising an increase in leasing.
At the end of the 1990s, the low participation of women in
the agricultural sector and their marginal position on farms
and in professional situations started to be taken into
account. Measures were slowly taken to remedy this situation
and a decade later, results were being seen in relation to
issues such as female participation, youth incorporation and
the LEADER and PRODER programmes. Nevertheless, the
sector is considered to be one of the most male-dominated
sectors of the economy, in addition to the very limited
opportunities for women in rural affairs, even after
experiencing slight improvement.
Between 1990 and 2000, the amount of farmland dropped
more than 9%, while irrigated land reached 18.6% of
farmland, an increase of more then three percentage points.
Within farmland, the amount of fallow land dropped during
this decade from 20.6% to 17.6%, while arable lands and
woodlands increased. Over these years, the mountainous
area increased by almost 4%, while the area dedicated to
other uses rose 13%. This last figure could be related to the
high rate of urban development that Spain has experienced
over the last 30 years.
The areas of the different crops underwent significant
changes that were caused by both the adaptation to the CAP
and the availing of the advantages that the European area
now fully provided to Spanish productions. The basic changes
were as follows:
Throughout the decade, the cereal area fell almost 10%,
while production continued to experience large fluctuations
due to weather conditions. This drop is primarily related to
the new aid system. The increase in livestock censuses,
especially with regard to fattening, resulted in an increase
in grain imports.
17
• The total wheat area increased 17%, but durum wheat
rose over 350% while common wheat dropped 18%.
These changes were due to the greater aid provided
for durum wheat, which resulted in the practical
disappearance of hard wheat in Andalusia, which the
flour factories then had to import from the international
market.
• As regards fodder grain, the area of barley dropped
25% while corn remained fairly steady.
• Rice experienced an almost 30% increase, also due to
the new form of regulation.
Amongst the industrial crops, the fall in the area dedicated
to beetroot is particularly noteworthy. It reached its peak
during 1993-1994, at which point it began a decline that
still continues today. The area fell almost 25% between
1990 and 2000.
Sunflowers underwent a similar process, with a maximum
area in 1993 and an overall drop during the decade of
30%. The drop in area continued until 2005.
The total vegetable area fell 20%, while total production
volume rose almost 10% due to the fact that the drop
occurred in the less-productive areas while the protected
area increased due to the strong performance of exports
to the EU.
The orange grove area hardly changed between 1990 and
2000. However, the tangerine grove area rose 47%.
Most of the fresh fruit trees experienced a drop in the
amount of area and an increase, in some cases very
pronounced, in production, due to the greater use of
irrigation and the fact that the productions were generally
more intensive.
However, the almond tree area has increased and
production has remained steady, also related to the aid
system.
The vineyard area fell 16% as a response to start-up aid,
while production stayed the same and even rose during
recent years thanks to the progress made in irrigation.
18
With regard to olive groves, area increased by 16% while
production rose around 50% with strong annual variations,
primarily due to the increase in irrigation and the
enhancement of new plantations.
With regard to the livestock censuses and productions:
During this decade, the pig census rose significantly, over
38%, while the cattle census rose 21%. In both cases,
these increases were the result of the good performance
of the domestic and foreign markets.
The dairy cattle census dropped 28% while the breeding
cow census rose 66%, both situations clearly due to the
CAP.
The sheep census remained steady while the goat census
dropped 21%.
Meat production rose over 40% during the decade. Of
special note were pig production, which increased 54%,
and cattle and poultry, both which rose 28%.
Despite the drop in the dairy cattle census, cow milk
production rose 8% thanks to the increased yield resulting
from the changes in food. Sheep milk production rose
22% as a result of the good performance of cheese.
In 1999, almost 1,800,000 farms were recorded in the
Agricultural Census, which was 21% less than in 1989. This
figure, which revealed a massive increase in concentration,
nevertheless reflected a very high number of very small farms,
which were unable to survive in the economic environment.
In comparison with these figures, the analyses conducted in
the discussions of the White Paper on Agriculture and Rural
Development concluded that the actual number of
moderately-professionalized agricultural farms did not exceed
440,000 in 1999:
In 1989, farms of less than 6 UDE (Economic Dimension
Units) represented over 83% and in 1999, 70%.
During these 10 years, the total work volume fell 12.2%,
primarily in extensive productions. The increase in the work
in the Technical-Economic Orientations (OTEs by their initials
in Spanish) of fruits and vegetables, olive groves, vineyards
and intensive livestock farming is particularly noteworthy.
Family work continued to predominate, although its
participation had fallen, dropping from 78% in 1989 to
69.3% in 1999. The 34% drop in work of family aid is of
special note. On the other hand, permanent salaried work
rose 44% while temporary work increased by 12.7%. One
important issue is the small size of most of the farms,
which prevented appropriate productivity and the
achievement of rational work organisation.
In 2000, the agricultural working population represented 7%
of the total, three percentage points less than at the start of
the decade. That year, agriculture's contribution to the Gross
Domestic Product (GDP) was less then 4%.
19
1.4 The first decade ofthe 21st century
The final years of the 20th century saw the approval of
the Agenda 2000, which aimed to prepare the EU for its
enlargement through the inclusion of the Eastern countries.
The Agenda expressly declared itself in favour of conserving
the environment and committed to food safety. The goals
that it undertook included modernising the European
agricultural model, minimising differences between regions
and limiting Community expenses. The final document
declared the need for an extensive reform of the CAP. The
sectors most affected were herbaceous crops, cattle meat,
dairy products (with guaranteed lower prices), wine,
processed fruits and vegetables, etc. The Agenda also
included new developments in rural development, considered
more agro-environmental measures and “ecologised” the
CAP, whose effects on our country included, amongst others,
the change of the Ministry's name, which is now the Ministry
of the Environment and Rural and Marine Affairs.
The decade kicked off with the Doha Round held by the
World Trade Organization, the aim of which was to continue
making progress in the area of world trade liberalisation.
The first years of this period were marked by the effects of
the health problems that affected European food during the
end of the 20th century, which were widely covered by the
media. This led to the drawing up of the White Paper on
Food Safety and the creation of European food safety
regulations, which entered into force in the middle of the
decade. Since then, it has conditioned the task of the
European food system, requiring agricultural farms, which
were exempt up until then, to strictly control their activities.
It favoured the verticalisation and transparency of the
activities in all phases by requiring traceability and the
application of hygiene standards, all of which arose from
Regulation EC 178/2002. The application of food safety
regulations must be understood as the Commission's
response to the warnings of European consumers, who were
aware of the CAP's costs. This application also entails an
extra cost in comparison with third-country products.
In 2003, the Intermediate Reform of the CAP was approved.
This Reform was founded on a new aid system that was not
linked to production. It was also based on historical
references and dependent on the fulfilment of a series of
legal requirements related to good environmental practices
in farming, food safety and animal welfare. If these
requirements are not fulfilled satisfactorily, the aid could be
forfeited. The basic concept lies in the decoupling of aid
from production. Although each country opted for a certain
decoupling index at first, there has been a growing trend
that is expected to lead to complete decoupling.222222222
This Reform sought to bring business decisions closer to the
market conditions and give more weight to environmental
issues and rural development, while addressing the serious
problem of the system's lack of social legitimacy. Its principles
have been applied to more productions, such as milk and
wine, processed fruits and vegetables, etc. and most of the
legislative activities have been focused, which is causing
important changes in the decoupled productions. In addition,
the CAP reform, which is planned for 2013, is focusing the
activities of all the member countries' agricultural
administrations. Several of these countries are already
drawing up documents on the agricultural outlook beyond
2020 and defining their future strategies.
Lastly, agriculture and energy have become more closely
related during this decade since the former has become,
through biofuels, a source of the latter supported by public
policies, together with the feeding of people and livestock.
Aside from the legislative initiatives aimed at embodying the
Community orientations, in Spain the enactment of the
Sustainable Rural Development Act is of special note. The
content of this Act, yet to be implemented, is related to the
agriculture of the Sustainable Economy Act, which is still
being passed through Parliament.
20
In 2007, global grain prices began to rise as a result of
financial capital entering the futures exchanges, the overlap
of bad harvests in the northern and southern hemispheres,
the absence of global stocks, growing deregulation, the
prospect of dedicating a percentage of production to biofuels
and the qualitative increase of consumption in emerging
countries. The stage was being set for the subsequent
economic and financial crisis. That rise had a very negative
impact on livestock farming and caused an increase in basic
foods with serious effects, especially on the poorest countries
and collectives. Also as a result of that crisis, the problem of
the lack of availability of sufficient food passed over the
entire world and world leaders placed food, and by extension
agriculture, on the political agenda. That rise in grains was
followed by a drop in prices with serious repercussions for
the agricultural sector.
This situation can be considered to be at the beginning of a
new operation of most agricultural product markets, in which
regular behaviours have fallen to the wayside and volatility
has become a hallmark against which an intervention
instrument is no longer available.
With this outlook, agricultural insurance policy, in which
Spain has a clear advantage, can expand its task to include
income insurance, playing an important role in the new
agricultural policy and introducing business criteria for risk
management in the sector.
Throughout 2008 and 2009, the economic and financial
crisis deeply affected the world and left its mark on the
agricultural sector. The most significant negative effects are
the difficulty in accessing credit, which calls into question
the continuity of the farms, the narrowing of margins
throughout the production chain, which stifles agriculture
and the companies involved in the subsequent phases, and
the fall in consumption, more in value than in volume,
especially in the higher price ranges. This places the
agricultural sector and its cooperatives in another situation
for which they are not prepared, while issues such as
structural deficiencies and lack of training have serious results.
In response to this new situation, which has delved deeply
into the inequality between the agricultural sector and the
subsequent phases of the production chain, especially
distribution, both the European Commission and the Ministry
of the Environment and Rural and Marine Affairs have
decided to analyse the food production value chain in order
to take action, placing many of the possibilities of better
farmer remuneration on the enhanced transparency of this
chain and on the improvement of the interphase relations
within it.
From the information available at the time this chapter on
the first decade of the 21st century was written, the following
was particularly noteworthy:
Between 2000 and 2007, overall farmland dropped almost
5% with varied behaviour: the area of fallow land and
unoccupied land rose, reaching 22% once again; arable
land (both dry and irrigated) dropped down below 50%;
while woodlands rose up to almost 28% as a result of
irrigation. The percentage of irrigated land has risen again,
now occupying over 21% of the farmland. There has been
a noteworthy rise in mountain area as well.
Total cereal area continued the drop that began during the
previous decade, while production remained steady with
large fluctuations. The area of other replacement crops,
like sunflower and pulse, has also dropped.
Vineyard area and production experienced few changes up
to 2007, despite the fluctuations. Subsequently, the
repeated low prices are leading to a significant start-up.
The olive grove area has grown, but at a slower pace than
in previous years. Nevertheless, production has continued
to grow, with large fluctuations, thanks to irrigation and
the entry into production of more intensive plantations.
As regards citrus fruits, the orange tree area has grown
over 8%, somewhat more than production, while the
tangerine tree area has risen more than 10%. It is worth
noting that the poor results of the recent seasons are due
primarily to the increase in the world supply and the
extensive entry into Europe of fruit from third countries.
21
The most important fruit tree crops have registered drops
in area of over 20%, generally accompanied by drops in
production.
The total garden produce area has slightly decreased, but
production volume and especially its value have increased.
Agriculture's participation in the economic activity of 2007
was below 3%, however food became the top
manufacturing industry. During the last decade, the
agricultural trade balance has remained highly positive
despite the growing grain importation.
Up until 2008, only the pig census increased (18%), while
the cattle and especially the sheep censuses have dropped
(3% and 20% respectively).
Until 2008, pig and poultry meat productions rose 20%,
cattle meat dropped slightly, and sheep and goat meat fell
by over 40%.
Between 2000 and 2008, the area of beetroot crops fell
almost 60% due to the new CMO, aimed at reducing
European production.
It is worth mentioning that the geographic location within
Spain of certain important productions is changing:
livestock farming, citrus fruit crops, etc.
In recent years, subsidies have contributed more than 25%
of the agricultural income as a result of aid system changes
and the alignment of prices with the international markets.
In 2008, the agricultural working population already
represented 4.3% of the total, with a 26% participation
of women, following a slight drop due to the role of safe-
haven sector that agriculture plays in the crisis.
The farms' experiences can only be monitored through the
Agricultural Farm Structure Survey (Encuesta de Estructuras
de las Explotaciones Agrarias), which is not comparable to
the Agricultural Census. According to this Survey, in 1997
there were 1,208,262 farms, in comparison with 1,036,210
in 2007. In other words, a 14% drop had been registered,
which was significant but not enough to have a collective of
adequately-sized farms. In reality, there has been a series of
atypical structural adjustment processes. Amongst these, task
outsourcing and the emergence of service companies
(especially in relation to machinery) in the agricultural sector
have been particularly noteworthy. This process has made
the concentration of work and management much greater
than the concentration of the farms. Thus, the work can be
organised better and a higher level of mechanisation and
efficiency is achieved.
All these changes, and the aid system in particular, have
caused significant modifications in land use. Also worth
noting are the drop in total farmland area, which has
occurred primarily since 1990, the drop in arable land as a
whole, and the pronounced increase in irrigated area.
2007 1980
Participation of the agricultural working population 4.3% 17%
Participation of agriculture in the GDP 2.8% 6%
22
1.5 Epilogue
Agriculture's low participation in the working population
and final production, after long years of reductions, leads us
to conclude that the sector has lost its interest for the
economy and Spanish society.
Nevertheless, agriculture continues to be a strategic sector
in Spain for several reasons:
On the one hand, the global crisis has placed food
amongst humanity's more serious problems and amongst
the strategic economic sectors for any country, whether
or not their authorities recognise it.
Agriculture is the basis of the local food systems, which in
turn are socioeconomic drivers in most of Spain's rural
areas, as it is an activity that is spread out throughout the
country and one on which the country depends.
Agriculture is the basis of the food industry, which in Spain
is the top manufacturing industry.
The food system as a whole, which includes agriculture,
comprises the largest Spanish production system.
The food system as a whole has a positive trade balance.
In addition, the food system is the most widespread of the
Spanish production systems and is present throughout the
entire country. This fact is even more relevant when one
takes into account that the depopulation of the central
area of the Iberian Peninsula is a very serious problem.
Over these years, agriculture has experienced significant
changes in response to the changes in agricultural policy, in
consumer habits and in societal organisation, as well as
economic and institutional changes, amongst others. These
changes have had multiple affects.
The contribution of vegetable productions rose from
56% to 60.3%.
The participation of fruits and vegetables rose from
22.4% to 35.7%.
The participation of olive oil rose from 3.6% to 4.7%.
The contribution of cereals and wine has dropped.
The contribution of livestock productions has dropped.
The contibution of meats related to intensive livestock
farming, especially pig and to a lesser extent poultry and
cattle, has remained steady.
The contribution of milk has dropped.
Main changes in the composition offinal agricultural production
The situation described in this work must be taken into
consideration with the far-reaching changes that are
occurring in the global food system, which directly affect
agriculture. Some of these changes started at the beginning
of the analysed period while others were already underway.
However, they have become more obvious and gained
importance in recent years:
Increase in the international flows of agricultural products,
intermediate products and finished products. This makes
it easier to relocate production and favours
competitiveness amongst agricultural products of different
origins, as it is more difficult to keep the production
systems isolated.
Globalisation of the sector's leading companies, those
which provide supplies as well as industries, merchants
and distributors. Agriculture and local companies are
hardly able to negotiate with these leading businesses.
Process and message globalisation and the growing
importance of the incorporation of R&D&I in all phases of
the chain.
Growing verticalisation of agriculture with the remaining
phases of the value chain, in such a way that strategic
production decisions are transferred to the leading agents
in exchange for greater efficiency.
Changes in consumer habits which lean towards their
homogenisation, the greater weight of advertising
messages, the destructuring of the main meal and the
decreased importance of passing knowledge and culture
down through families.
Growing role of distribution, with large globalised
companies, in determining consumption and in the
structuring of the production chain until reaching
agriculture.
2007 1980
Total farmland (ha) 17,397,000 20,500,000
Area of irrigated land (ha) 3,814,600 2,829,000
Area of arable land (ha) 8,691,500 10,660,000
Area of fallow land and unoccupied land (ha) 3,894,900 4,920,000
Area of woodlands (ha) 4,810,500 4,920,000
23
In short, since 1980, Spanish agriculture has been undergoing
massive changes that have been overlapping each other over
the years. Although it is very difficult to measure the scope
of each one, possibly those already experienced in the 21st
century and those which lie ahead due to new consumer
habits, business concentration processes driven by the crisis
and the new agricultural policy, those with greater scope are
those which have yet to be resolved.
It seems obvious that the agricultural sector, both Spanish
and European, is facing a new reality that does not include
the classic instruments of agricultural policy. New mechanisms
which include agricultural insurance, connection to the
territory and the remuneration of intangible assets such as
the conservation of biodiversity and the environment are of
special note, with issues as obvious as the fight against
erosion in much of Spain and water usage, and collaboration
within the production chain can occupy a preferential position
in the new policy.
Faced with this new situation, there are issues such as the
deficient structure of agricultural farms, lack of training of a
very high number of farmers and a low level of dedication,
which fosters a lack of professionalism. These issues signify
a clear non-competitiveness factor that must be addressed
with evident support mechanisms for the concentration and
revitalisation of the sector with both classic and new
mechanisms (crop sections in the cooperatives, Agricultural
Processing Companies (SAT by their initials in Spanish) for
joint farming, service companies, etc), with training policies,
technology transfer policies and instruments that make it
possible to face third-country competition and take
advantage of production in the European territory and within
the parameters of the European production model.
2 The Spanish agriculturalinsurance model. Structure.Milestones
26
This introductory chapter summarises the main milestones
that have marked the evolution and establishment of the
structure and operation of agricultural insurance in Spain. It
is a policy that has been and still is fundamental for our
country's agricultural and agri-food development and
therefore, for our entire economy.
The serious climatic problems experienced by our country
planted the seed for the creation of agricultural insurance
and its gradual development. Around 1917, there were some
twenty companies that operated in Spain which were
dedicated to insuring harvests against the risk of fire. There
was also a large group of friendly societies and mutual
insurance companies that insured livestock. In addition, some
foreign-capital companies offered protection against hail.
During that year, a mutual insurance company dedicated to
covering hail risk (Caja de Seguros Mutuos contra el Pedrisco)
was created and the Ministry of Development (the office that
handled agricultural affairs at that time) appointed a
committee that laid the foundations for a National Mutual
Insurance company specialised in hail.
The result was the appearance of the National Mutual
Insurance Company for Agriculture and Livestock (Mutualidad
Nacional del Seguro Agropecuario) in 1919. It was created
with the ambitious objective of covering all rural risks, but in
the end it focused exclusively on hail. The losses that this
Mutual Company had to cover were so much higher than
the premiums it received that the Government came to its
aid two years later, providing an annual subsidy of 250,000
pesetas (1.502,53 euros). In 1929, the Mutual Company
became the Rural Insurance Commissioner's Office (Comisaría
de Seguros del Campo), which in turn became the
Agricultural Insurance Service (Servicio de Seguros Agrarios)
in 1930. In reality, this latter entity acted as the Reinsurance
and Compensation Fund (Caja de Reaseguros y
Compensación).
In 1934, the Agricultural Insurance Service became the
National Rural Insurance Service. This entity operated until
1953, offering reinsurance policies to private insurance
companies for insurances against hail, fire and livestock
mortality. This organisation had a permanent deficit due to
the impossibility of balancing the premium income with the
indemnities paid for the insured losses. This situation depleted
its reserves and made it necessary to obtain special loans. All
the above led to the enactment of the Rural Insurance Act
of 1953, which entrusted agricultural insurance to private
enterprise. Later in 1954, the Act of the Insurance
Compensation Consortium (Consorcio de Compensación de
Seguros - CCS) was approved. Since then, a need that
experienced more and more demand began to grow: a
comprehensive agricultural insurance capable of covering
multiple risks. A system was needed that resolved the
problems of a deep-rooted and ineffective model that only
protected against unquestionable and continual risks.
Nevertheless, it wasn't until the 1970s that national
agricultural insurance underwent another significant change.
The year 1973, with the Fourth Development Plan in progress,
saw the arrival of the oil crisis and the steep rise in price per
barrel. It could be said that the currency reserves began to
dwindle at full speed as a result of the oil payments. Money
2.1 Brief summary of the historyof agricultural insurance inSpain(1)
(1). This chapter is a summary of the work prepared by AGROSEGURO in 2005, which extensively covers all the aspects commented here, as well as others that
have not been included. Some of the texts are literal transcriptions from this document: AGROSEGURO 1980-2005. The story of a great adventure. Published by
AGROSEGURO.
27
had to be saved and one of the expenses that could be
reduced was the purchase by the State of the entire wheat
harvest. Thus, a maximum limit was established. What was
not expected was the excellent cereal harvest of 1973, the
surpluses that resulted and the consequent fall in prices. This
factor reinforced the Government's decision to make the
harvest of that year and of future years subject to quotas.
From that moment onwards, farmers could plant all the
wheat they wanted, but the State would only buy cereal up
to a certain limit.
The agricultural seasons of the years 1973 and 1974 were
part of the reason for the creation of a Cereal Pool (Pool of
Co-insurance Entities of National Cereal Insurance), which
grouped together the insurance companies in order to
manage combined insurance. The Pool, which unified some
100 entities, faced a situation that was aggravated by
management difficulties. The first was the assumed obligation
of reaching all the farmers and establishing an effective
management network for that purpose. On the other hand,
it was known that competition was going to be intense
between companies and it was essential to avoid resentment
arising from inequality between the farmers when assessing
the losses.
The Confederation of Saving Banks (Confederación de Cajas
de Ahorro) was consulted to resolve the first problem. This
entity was present in almost all parts of the country and in
all the Spanish rural areas. For the second problem, a
“gentlemen's agreement" was reached amongst the entities
and common adjustment systems were studied, unifying the
criteria and handling neighbouring farms in the same way in
the event of a loss.
Approved on 27 October 1977, the Moncloa Pacts (Pactos
de Moncloa) included the agreement to present an
Agricultural Insurance Act before the lower house of the
Spanish Parliament (Congreso de los Diputados). This new
legal text was to replace the Act of 1953 which, despite the
efforts that were made, had not achieved the expected
results. Lastly, Combined Agricultural Insurance Act 87/1978
was approved in December 1978. Almost a year later, in
September 1979, Royal Decree 2329/1979, which approved
its implementing regulation, was passed.
This Act appeared at a time when 17% of the Spanish
working population was employed by the agricultural sector,
which created settlement areas in the countryside. The new
Act created a series of institutions which, in addition to other
important players, have provided the Spanish Agricultural
Insurance System with unique value and significant stability.
It is a System in which public and private entities co-exist
together. It is based on voluntary participation, from both
insurance companies as well as from the agricultural and
livestock farmers themselves, and consists of subsidies from
the Central Government and the Autonomous Communities.
The main Institutions that comprise this insurance structure
are the State, through the Spanish Agricultural Insurance
Agency (ENESA), the General Directorate of Insurance and
Pension Funds and the Insurance Compensation Consortium
(CCS). In second place are the Autonomous Community
governments that supplement the subsidies for the
procurement of agricultural insurance. Third are the
Agricultural Professional Organisations, which represent the
agricultural and livestock farmers. And lastly, the insurance
carriers, grouped together in AGROSEGURO.
2.2 Structure of the agriculturalinsurance system
The Spanish Agricultural Insurance Agency (ENESA) was
created by Royal Decree 2650/1979 of 11 October as the
self-governing commercial entity belonging to the then
Ministry of Agriculture, Fisheries and Food.
The two main objectives that the legislation entrusted to
ENESA were the drawing up of the Triennial Conditions and
the Annual Agricultural Insurance Plan, which must be
approved by the Council of Ministers and, at the same time,
the drawing up of the Ministerial Order, which set the
governmental criteria for the assignment of subsidies at the
price of insurance for the different vegetable and animal
productions which the System protects.
The budget which supports these subsidies is included in the
budget of what is now the Ministry of the Environment and
Rural and Marine Affairs (MARM) and is managed and
administered by ENESA. Other functions which this entity is
responsible for are:
• Establishing the minimum technical conditions for farming
(which are incorporated into the set of clauses of the
insurance policies taken out by farmers, the violation of
which can result in the denial of the loss by the adjusters
in charge of assessing the damage); the insurable crop
yields; the prices for the purposes of insurance and the
deadlines for taking out each insurance
• Conducting the necessary feasibility studies that show
the insurability of the risks which are to be covered
through the System.
28
ENESA, presided over by the Undersecretary of MARM, is a
top decision-making entity with a General Committee, which
is comprised of representatives from MARM, the Ministry of
the Treasury, the Agricultural Professional Organisations and
Cooperatives, AGROSEGURO (since 1997) and the
Autonomous Communities (since 1998) which have been
participating in this Committee's meetings in a rotational
manner.
Closely related to this General Committee (which is, in a
manner of speaking, at the vertex of the pyramid) are two
instruments of collegial participation in the System. The first
is the Regional Committees (now led by the respective
Autonomous Communities) which channel, as a discussion
forum, the proposals from the Agricultural Organisations and
Cooperatives related to the development of agricultural
insurance. The second is the Work Groups (selected by
ENESA), which analyse not only the proposals that are finally
made a reality by the Regional Committees but also any
other issues related to the Annual Plans and their effective
implementation.
These are the procedures put in place by the System in order
to facilitate participation by all the involved public and private
Institutions in the design and adaptation of the different lines
of insurance to the actual interests of their target audience.
2.2.1 ENESA
STATE AUTONOMOUSCOMMUNITIES
AGRICULTURALSECTOR
PRIVATEINSURANCE
MINISTRY OF THE ENVIRONMENTAND RURAL AND MARINE AFFAIRS
MINISTRY OF THETREASURY
SPANISH AGRICULTURALINSURANCE AGENCY
GENERAL DIRECTORATE OFINSURANCE AND PENSION FUNDS
INSURANCE COMPENSATIONCONSORTIUM
AGRICULTURALORGANISATIONS
AGROSEGURO, S.A.
29
In the insurance world, reinsurance offers the possibility of
lessening the impact of the loss on the results, while at the
same time increasing the ability to assume risks, as it
diversifies the entire portfolio's exposure to the possibility of
ruin.
In the agricultural insurance sector, where the financial
consequences for both the insured parties and insurance
companies can reach catastrophic levels due to weather-
related or epidemiological events, reinsurance has an
absolutely determinant importance. It could be said that in
this sector, more so than in others, reinsurance is that which
“determines” the possibility or impossibility of covering a
risk.
Combined Agricultural Insurance Act 87/78 decided to
reserve the role of reinsurer for the Insurance Compensation
Consortium: “…This Consortium shall assume those risks or
carry out the compensation for excess loss in the manner
which has been determined by the relevant regulations for
each case”. (First Additional Provision. Five).
The Implementing Regulation of the Act, dated 14 September
1979 (Section 45), expressly sets forth the functions that
must be carried out by the Consortium, amongst which the
following are particularly noteworthy:
a) “To act as mandatory reinsurer in all branches of this
insurance, in the manner and amount determined by the
Ministry of the Treasury”;
b) “To manage the loss adjustments with a view to fulfilling
its function as reinsurer as effectively as possible…”; and
c) “To assume, by way of exception, the management of
direct insurance when so agreed by the Government in
the cases set forth in Section Forty-Three…”
It could be said that these three functions have been
effectively carried out by the Entity over the thirty years of
the System's history, making it a key player in the System's
positive development and revealing the usefulness and need
for public support of this activity that covers the risks to
which the agricultural sector is subject.
With regard to the last of the abovementioned functions,
the Consortium eventually held 49.65% of AGROSEGURO's
capital, which meant that, as a direct insurer, it would cover
this same percentage of total risk assumed by the Co-
insurance Pool during the most difficult years of the System,
thus facilitating its survival and gradually stepping back as
the private insurance companies increased their participation
in the Pool.
2.2.2 Insurance compensationconsortium
30
With regard to the second function, the Consortium has
been regularly and systematically exercising its control of the
adjustments that, season after season, have been carried out
by the professionals that provide their services to
AGROSEGURO.
Lastly, as a mandatory reinsurer of the System, its protection
has also been evolving as the System itself has been evolving.
Thus, during that first phase that took place from 1980 to
1987, the Consortium assumed, through the “excess loss”
mode, 95% of the loss that exceeded 100% of the
commercial premiums of all the insurance lines included in
the Annual Plans. This, together with other factors related
to the weather and the lack of an appropriate rate fixing
system, resulted in very high losses for this Entity during this
first phase and until the mid-1990s, due to the carrying out
of this function. Consequently, it had to resort to the cover
provided by the State.
Since 1988, and as a result of the very important measures
agreed in 1987, the Consortium has had a double
reinsurance system: an “excess loss” mechanism for the lines
classified as “viable” and a “stop loss” mechanism for the
second group, which is comprised of the "experimental
lines" and for which the Consortium would compensate the
excess loss above 601,000 euros.
YEAR ENTITIES CONSORTIUM
NUMBER % CAPITAL % CAPITAL
1980/84 92 100 --
1985 88 60.32 39.68
1986 82 52.28 47.72
1987 75 50.35 49.65
1988 63 56.42 43.58
1989 62 62.92 37.08
1990 66 70.22 29.78
1991/92 64/63 83.97 16.03
1993/05 60/35 87.5 12.5
2006/09 33/27 90 10
31
1988-2005 PHASE
EXPERIMENTAL LINES
VIABLE LINES
The following table shows the operation of this protection
mechanism from 1988 to 2005, inclusive:
FIRST €601,012,10
LOSS
EXCESSLOSS
PREMIUMS
REMAINDER
CONSORTIUM
ENTITIES
OVER 160 % OF THE COMMERCIAL PREMIUMS
FROM 130% TO 160%OF THE COMMERCIAL PREMIUMS
FROM 90% TO 130%OF THECOMMERCIAL PREMIUMS
FROM LOADED RISK PREMIUMTO 90% OF THE COMMERCIAL PREMIUMS
EXCESSLOSS
LOADEDRISKPREMIUMS
COMERCIALPREMIUMS
LOSS
100
90
95
50
10
5
50
CONSORTIUM
ENTITIES
32
2006-2007 PHASE
In 2006, the Consortium partially modified this protection
mechanism through the following operation plan, thus
introducing “profit participation”:
EXPERIMENTAL LINES
REMAINDER(From € 3,000,000)
72.5 27.5
LOSS
OVER 90 % OF THE COMMERCIAL PREMIUMS
FROM THE LOADED RISKTO 90% OF COMMERCIAL PREMIUMS
EXCESSLOSS
LOADEDRISKPREMIUMS
COMMERCIALPREMIUMS
CONSORTIUM
ENTITIES
OVER 160 % OF THE COMMERCIAL PREMIUMS
FROM 130% TO 160%OF THE COMMERCIAL PREMIUMS
FROM 90% TO 130%OF THECOMMERCIAL PREMIUMS
FROM LOADED RISK PREMIUMTO 90% OF THE COMMERCIAL PREMIUMS
EXCESSLOSS
LOADEDRISKPREMIUMS
COMMERCIALPREMIUMS
LOSS
100
90
80
50
10
20
50
CONSORTIUM
ENTITIES
VIABLE LINES
33
FROM 2008
Lastly, since 2008, the Consortium's loss compensation plan
has been aligned with the following approach:
a) For the experimental lines, the Consortium compensates
all excess loss over the loaded risk premium that exceeds
three million euros.
LÍNEAS VIABLES
OVER 160 % OF THE COMMERCIAL PREMIUMS
FROM 130% TO 160% OF THECOMMERCIAL PREMIUMS
FROM 90% TO 130%OF THECOMMERCIAL PREMIUMS
FROM LOADED RISK PREMIUMTO 90% OF THE COMMERCIAL PREMIUMS
EXCESSLOSS
LOADEDRISKPREMIUM
COMMERCIALPREMIUMS
LOSS
90
80
50
10
20
50
95 5
CONSORTIUM
ENTITIES
The immediate consequence of the approaches of this last
phase is that the insurance companies grouped in the pool
were more exposed to risk, which has led to the need for
greater reliance on the international reinsurance market in
order to cover the part that is not assumed by the
Consortium. In other words, the System is opened up even
more to what we could call traditional practices of the
markets, without renouncing the philosophy that inspired its
creation: the public-private partnership.
b) For the viable lines, a new protection “interval system” is
established, as shown in the following graph:
EXPERIMENTAL LINES
CONSORTIUM
ENTITIES
LOSS
EXCESSLOSS
LOADEDRISKPREMIUM
95% 5%
2% NETCOMMERCIAL
PREMIUM EXCESS
The lines Collection and Disposal of animals (C&D) as well as the experimental lines will be treated as separateT.
Throughout these thirty years, the Insurance Compensation
Consortium has paid 997.51 million euros in compensation
for excess loss and has created a Stabilisation Reserve in the
amount of 722.4 million euros, which ensures that it can
handle situations of extreme loss on its own.
34
2.2.3 AGROSEGURO
PRODUCTION AND COMMUNICATION AREA
RESEARCH AND DEVELOPMENT AREA
CLAIMS AREA
MANAGEMENT AREA
ORGANISATIONAL AND IT AREA
Agrupación Española de Entidades Aseguradoras de los
Seguros Agrarios Combinados, S.A. (AGROSEGURO) was
created for the purpose of managing, in the name and on
behalf of the insurance companies that belong to the co-
insurance pool, all that which is related to combined
agricultural insurances, thus fulfilling one of the provisions of
the Regulations of Act 87/78 in its Section 41.
Twenty-five insurance companies took part in the creation of
this public limited company (17 April 1980) with an initial
capital of one million pesetas (equal to 6,010 euros). That
same year (29 July), the number of insurance companies rose
to almost eighty, increasing the capital up to 25 million
pesetas (equal to 150,253 euros).
Currently, at year end 2009, AGROSEGURO, S.A. has a share
capital totalling 9 million euros and 27 shareholders, including
the Insurance Compensation Consortium.
Although it is not an insurer, due to express imposition of the
Regulations of Act 87/78, it has an organisational chart that
is similar to that of an insurer in order to facilitate the
relationship with the entities that belong to the pool.
Each insurance company's participation in the share capital
equals its participation in the total risk assumed by the pool
and, consequently, in the final result of each year. This
participation can vary, and in fact it does, from one year to
the next, in accordance with the company's Bylaws, which
set forth the business contribution that each insurance
company has made to the pool during a certain period of
time as one of the main criteria for determining the amount
of this participation.
Once the amount of the respective premiums has been
received, AGROSEGURO S.A. carries out amongst others the
following functions: issues the policy and respective bill;
receives the loss claims; assesses the damage and calculates
the indemnity to be paid; pays for the losses; and prepares
the pool's quarterly and annual accounts.
In addition to these functions, it also prepares the tariffs that
correspond to the different lines of insurance based on its
own statistical data, which are obtained from the respective
series of losses; it draws up the set of clauses for the policies
and participates, together with ENESA and the General
Directorate of Insurance and Pension Funds, in the
preparation and drawing up of the different adjustment rules
that are applied during damage assessment.
Consultancy and international relations
AGROSEGURO ORGANISATIONAL CHART
PRESIDENCY
GENERAL
Legal Department
Regional Directorates
35
2.3 Milestones in the evolutionof the system created in1978
2.3.1 The Constitution of 1978
Even though the current Agricultural Insurance System has
a short history, a series of events that could very well be
considered milestones have taken place, marking its
evolution.
The first of these, which has been in existence for the same
amount of time as the System, is the Spanish Constitution,
passed just a few days before the approval and publication
of Combined Agricultural Insurance Act 87/78 of 28
December, to the point that this Act is normally considered
the first Spanish Constitutional Act of this new era in our
country's history.
The Constitution's impact on the System is undoubtedly
determined by the role that it assigns to the Autonomous
Communities. Thus, as this decentralisation model has
become more and more established, the Autonomous
Communities have been increasing their support for the
System, basically through complementing, with their
contributions, the contributions that the Central
Administration makes to the lines of insurance related to
vegetable and animal productions, which are more
representative or more socially or economically interesting
for the Community in question. That greater involvement
has been validated by the gradual increase of their
participation in the financing of insurance premiums, which
rose from no participation during the first eight years of the
System to 4.78% of the total financing in 1988 (the first
year in which three Autonomous Communities provided
financing) and to 28.47% in 2009.
36
2.3.2 Entry into the EuropeanCommunity
When Spain formally entered the EEC on 1 January 1986,
the Combined Agricultural Insurance System had completed
its fifth year of existence by integrating itself, as the group
of the Spanish insurance sector and its institutions (e.g. the
Insurance Compensation Consortium), into the normal
operation of an insurance market which already focused on
concepts such as freedom of establishment and freedom of
providing services.
Despite its small size during those first years and the
difficulties it had to overcome, the System was able to
maintain a reasonable growth rate, so much so that in April
1995 the European Parliament (P-1161/95; Official Journal
of the European Communities No. C/202/46 of 7.8.1995)
posed a written question to the Commission regarding the
compatibility of the aid that the Spanish State was providing
to the agricultural insurance premiums with the provisions
of Section 92.2 of the Treaty on European Union, related to
the compatibility of aid designed to repair damage caused
by natural disasters with the Common Market.
Mr. Fischler's response, dated 3 May 1995, on behalf of the
Commission, analysed the criteria in force and concluded
that "provided the measures of state aid respect these
criteria, the Commission considers them to be in accordance
with the provisions of the Treaty". This could be the first
important recognition of a System whose structure and social
utility began to be acknowledged beyond our own borders.
But it was not until November 2001 that the Government
officially put on the table the issue of the Formal Fulfilment
of the requirements of the EU Treaty in respect of the Spanish
Agricultural Insurance System. The response from the
Commission's Directorate-General for Agriculture, dated 30
January 2002, concludes that “the aid provided to
agricultural insurances complies with the conditions set forth
in Section 11.5 of the Guidelines (from 1.2.2000) and can
benefit from the exception set forth in letter c) of Subsection
3 of Section 87 of the Treaty…”.
This Commission Resolution could be considered the official
recognition of the System's adaptation to the Community's
rules. This adaptation was still in force when the European
Commission of 27 member states finally recognised, for the
first time, the usefulness of agricultural insurance as an
instrument that stabilises agricultural income, creating the
possibility of allocating a part of the funds reserved for the
“second pillar” towards subsidising the cost of the premiums
for these types of insurances (Sections 69 and 70 of Council
Regulation (EC) No. 73/2009 of 19 January 2009).
From that moment onwards, there have been two channels
for financing agricultural insurance premiums in the European
Union: the abovementioned Regulation No. 73/2009 and
Commission Regulation No. 1857/2006 of 15 December
2006. Our country continues to use this second, older option
because, in theory, it is considered to be better adapted to
the System's special characteristics and because it is
exclusively financed by the General Budgets of the State and
of the Autonomous Communities, amongst other reasons.
37
2.3.3 Classification of the lines ofinsurance and reinsurance
If starting up insurance activity is always complicated, getting
the Spanish Agricultural Insurance System off the ground
could not avoid this rule: in addition to the weather-related
factors, with conditions that were especially harsh for the
herbaceous crops during those first years, there was also:
the lack of technical and statistical knowledge regarding the
performance of the different crops; the consequent lack of
appropriate rates; adjustment procedures that undoubtedly
did not help with loss management; and certain mechanisms
that the Administration used to pay the subsidies, which
created financing difficulties for the System's operations;
and, last but not least, a reinsurance cover that was clearly
insufficient.
The continual losses that these conditions created for the
insurance companies that belonged to the Co-insurance Pool
caused many of them to gradually leave. Thus, in 1985,
participation in the Pool was divided as follows: 60.32% for
private insurers and 39.68% for the Consortium. This
situation continued to worsen and by 1987, these figures
had changed to 50.35% for insurance companies and
49.65% for the Consortium. The Consortium became one
of AGROSEGURO's shareholders under Additional Provision
Five of Combined Agricultural Insurance Act 87/78 and
Section 43.2 (Principle of Subsidiarity of the State) of its
Implementing Regulation dated 14 September 1979.
Nonetheless, the year 1987 marked the lowest point of the
crisis. As a result of the work started in 1986, this year saw
the adoption of two measures that, at the end of the day,
became essential for resolving this situation: the classification
of the lines of insurance into “viable” and “experimental”,
in such a way that a special protection system was established
for the latter; and the modification of the excess loss
compensation system by the Insurance Compensation
Consortium in order to limit the possible losses of the co-
insurance companies at levels that were clearly less than
those experienced during the first seasons.
These two measures, which were not the only ones adapted
at that time, have contributed since then to the growth and
strengthening of the System and to the assumption by the
private insurance companies of a predominant role in the
Pool.
Thus, in 2009, the Consortium's participation in the Co-
insurance Pool was 10%, leaving the rest to the private
insurance companies. The “viable” lines represent 27.28%
of the net premiums, while the "experimental" ones
represent 72.72%. The latter includes the lines of collection
and disposal of dead animals on the farm.
38
2.3.4 Insurance for covering expensesdue to lack of grazing lands
This insurance, which appeared for the first time in the
System in the 2001 Plan, was created to compensate livestock
farmers for the increase in costs to feed their livestock due
to a lack of grazing lands on extensive livestock farms.
The importance of the qualitative leap represented by the
appearance of this new cover amongst those offered by the
System is enhanced by the following circumstances that
occurred in the management of this insurance, amongst
others:
• It is index insurance, unknown up until now in the
agricultural insurances marketed in our country.
• It is based on the use of satellite images and on the
handling of these images, in Spain, by the Remote
Sensing Laboratory of the Department of Applied Physics
at the University of Valladolid (LATUV), consisting of
calibration, georeferencing, atmospheric correction and
extraction of NDVI (Normalised Difference Vegetation
Index) values.
The conjunction of different technologies and sectors is thus
produced: scientific, provided by satellites and university
research; computer-related, which makes it possible to use
the obtained information for insurance purposes; and
insurance-related, which through the actuarial technique sets
the price of the cover based on factors such as the frequency
and intensity of the damage produced by the risk in question.
Bovine spongiform encephalopathy (BSE), better known
as “mad cow disease”, appeared in the year 2000 and cost
the European cattle sector at least 92 thousand million euros,
making it the most costly disease to ever affect European
cattle. This disease sparked the greatest volume of legislation
ever passed by the EU's regulatory bodies and required the
national institutions to establish a series of measures aimed
at preventing, controlling and eradicating this disease.
Amongst the measures that were approved, Regulation (EC)
No. 99/2001 defines the concept of “specified risk material”,
SRM (the name by which this insurance line was first known),
which includes the dead animals of the ruminant species and
requires the transformation and elimination of the human
and animal food circuits.
Later, Regulation (EC) No. 1774/2002, which went into force
on 1 May 2003, generally required incineration or
transformation in specific industries for the two categories
of “ruminant species” and “rest of the animals” that died
on the farm.
The political decision to manage these issues through the
Agricultural Insurance System by means of a cover of the
type offered by the assistance insurances signified a very
2.3.5 Insurance for the collection anddisposal of dead animals on the farm1)
(1). En adelante, R y D.
large technical and insurance management challenge. It
consisted of not only setting a price for this service, but also
something more complicated: coordinating with the different
Autonomous Communities, as they are the ones that
designate and authorise the companies that carry out the
tasks of collection and transport to the incineration plants;
determining the routes for pick-up and, if applicable, the
cases in which a veterinarian must accompany the carrier to
collect the respective samples which must be analysed in the
laboratory; and creating a system for the receipt of "loss
notifications", so that they can be sent immediately to the
appropriate management company to ensure that the
collection takes place within a period of no longer than 24-
36 hours.
In light of this last issue, AGROSEGURO created its own Call
Centre, which provides personalised service 365 days a year,
and an IVR (Interactive Voice Response) service which
attended to almost 584,000 calls in 2009. This last service is
only for livestock farmers in the five Autonomous
Communities where this management is offered.
However, in addition to this cover for which the livestock
farmer pays around 25% of the premium, with the State
and Autonomous Communities paying the rest, the creation
of this insurance line during the second half of 2001 has
facilitated better knowledge of the actual volume of different
livestock species in Spain (cattle, non-cattle, pigs, poultry,
horses, etc.) by means of control by the insurance manager
(AGROSEGURO) of the possible cases of underinsurance or
overinsurance. These cases can be detected through cross
information from the farmers' insurance applications and the
collection notifications (more than 192,000 and 899,000,
respectively, in 2009).
As part of the prevention and improvements of this activity's
sanitary conditions, there is the control, also by the insurance
manager, of the biosafety measures in which this activity is
carried out: a watertight body in the trucks in order to
prevent liquids from leaking; automatic closure of the trucks'
upper doors; installation in the vehicles of a disinfection
system for the wheels and underside; insecticide devices
inside the body to prevent epidemiological risks.
These lines of insurance which, as has been mentioned, were
incorporated into the System during the second half of 2001,
service all the Autonomous Communities except Cantabria,
La Rioja and the Basque Country. They have a reserve of
accrued net premiums in 2009 of 157.25 million euros,
which is the highest amongst all the lines offered by the
System, with 24.20% of all the premiums in this year. More
than 95% of the cattle livestock (5,164,312 animals) are
insured, as are 80% of the rest of the species overall
(244,271,349 animals/places).
Their implementation signifies, without a doubt, a very
important milestone for the System, not only because of the
volume of premiums it provides, but also because it
represents openness to other types of insurance and services
that were unthinkable in 1980.
39
3 Insured Productions
42
The Law of 1978, which set forth the conditions for the
development of the current Agricultural Insurance System
had two important strengths, amongst others, that have
been maintained since the beginning and which have
fostered its systematic progression since then. The first
strength is the establishment and practice of what is known
today as a “public-private partnership”, integrating the
actions of the Public Administrations, Agricultural
Organisations and private insurance sector. The second is the
adoption of some of the most classic principles of the
insurance practice, amongst which the following are
particularly noteworthy: the principle of its implementation
“in a gradual manner based on productions, areas and
risks…” (Sec. 4) and that of the diversification of the risks to
be covered, in order to favour their dispersion and reduce
exposure to negative financial results.
Based on this philosophy of prudence, imposed many times
by the actual difficulty of the task to be performed, the
System gradually incorporated productions and risks in such
a way that today we can say that all the country's vegetable
productions have at least one series of basic covers for which
they can sign up.
43
The first Combined Agricultural Insurance Plan was approved
by the Council of Ministers on 30 May 1980 with the
following lines:
• Comprehensive Winter Cereals Insurance (experimental
plan for 10 regions with 50% cover), covering frosts,
droughts, floods as well as hot and/or hurricane winds
once stem elongation had taken place during the
harvest of 1981.
• Wine grape insurance, throughout the entire country,
with 100% cover. Covered risk, hail.
• Apple insurance, throughout the entire country, with
100% cover. Covered risk, hail.
• Tobacco insurance, throughout the entire country, with
100% cover. Covered risk, hail.
• Combined insurance for citrus fruits (orange, tangerine,
lemon and grapefruit) for 15 provinces, covering frosts
(50% cover) and hail (100% cover).
These five lines of insurance were the beginning of the
System. With the 1981 Agricultural Insurance Plan, this
number was increased to seventeen (including a line for
comprehensive cattle insurance) and later to twenty-two with
the 1984 Plan.
The System's gradual expansion towards new vegetable and
animal productions has not stopped growing since, despite
the serious difficulties that were experienced during the first
years until 1987.
This evolution (which, for the current purposes of this
publication finishes in 2009) has resulted in 114 vegetable
production lines; 14 livestock production lines; four
aquaculture production lines, with the first line for fish farms
dating back to 1996; nine lines for the collection and disposal
of dead farm animals, with its first implementation in 2001;
and one forestry production line, implemented for the first
time with the 2006 Plan.
The enhancement of productions and covers can easily been
seen in the enumeration that the annual Agricultural
Insurance Plan carries out each year. This Plan also groups
together the different lines, normally by type of insurance.
3.1 Families of lines and linesof insurance. Evolution andtimeline
44
3.2 Insured agricultural areaand production
As mentioned in the previous point, the System has
significantly evolved over its thirty years of existence in all its
aspects. New productions and risks have been incorporated
and there has been a sharp increase in the procurement of
insurance as a response from the agriculture and fishing
sector, which is resulting in high implementation levels in
most productions.
YEAR HECTARES PRODUCTION IN KG
1980 57,209 321,675,000
1981 3,985,665 10,245,039,000
1982 3,482,268 8,907,546,000
1983 3,906,913 10,969,710,000
1984 6,017,067 17,165,459,000
1985 4,950,811 15,924,057,000
1986 4,224,215 13,329,774,000
1987 4,119,504 12,888,909,000
1988 4,107,665 14,708,916,000
1989 4,119,046 14,843,574,378
1990 4,016,812 15,069,483,488
1991 4,427,675 16,603,294,328
1992 4,326,930 15,947,287,603
1993 4,397,879 17,133,216.888
1994 4,358,847 17,514,606,284
1995 4,820,530 17,464,513,606
1996 5,065,332 22,006,749,379
1997 4,985,778 20,786,762,298
1998 5,489,366 24,440,601,309
1999 5,584,778 26,100,189,971
2000 5,983,686 28,947,089,387
2001 5,494,699 25,679,601,067
2002 5,375,994 25,932,471,806
2003 5,469,817 26,880,467,106
2004 5,865,086 28,000,280,286
2005 6,186,686 26,368,603,947
2006 5,542,795 25,559,151,113
2007 6,205,877 29,966,648,379
2008 5,792,676 29,408,213,169
2009 5,522,507 27,302,279,842
Evolution of the number of hectares and kg ofagricultural production that are insured.kkkkll
45
Below is a brief descriptive analysis of the evolution of the
main sectors that comprise the System, without going into
the particular situation of each insurance in specific
geographic areas.
In order to provide an overview of each sector, we have taken
the average percentage of production implementation, area
and, if applicable, of animals or places for every 10 years
since the start of the System.
Insured agricultural area (millions of Ha)Insured agricultural production (thousand millions of Kg)
0
5
10
15
20
25
30
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
46
These crops are primarily located in the Autonomous
Communities of Castilla y León, Andalucía y Castilla-La
Mancha, where the prevalence of cereal is evident, occupying
around 70% of the total area. Barley is the predominant
crop.
The evolution of the production of all the cereals over the
last thirty years has experienced normal fluctuations of the
typical weather-related variability, especially the annual rain
amount and distribution. This situation, together with the
customary fluctuations due to prices and the impact of the
CAP measures, which have been abundant and varied,
especially during the last two decades, have been a large
determining factor for this sector's performance.
The average yield of all the cereals has increased around
1T/ha, which can be attributed to the improvement of the
varieties planted and of the farming techniques, without
forgetting the differences of dry and irrigated farmland.
From the insurance perspective, as commented at the start
of this chapter, the comprehensive winter cereal insurance
has existed since the beginning of the System, developing
over the entire period. It currently offers farmers a varied
range of insurance options. In this regard, the yield insurance
for extensive herbaceous crops, which was created during
the 2000 harvest, makes it possible to establish maximum
insurable yields and customised rates for farmers. Thus, more
crops can be insured and greater coverage can be provided
than with tradit ional comprehensive insurance.
Decades
80-8990-9900-09
Averageinsurablearea (ha)
6,920,4887,179,5077,679,544
Averageinsured
area (ha)
3,982,0923,677,2555,110,996
% Ofinsured/
insurable area
57.5451.2266.55
% Of increase in insured
area compared
witch previus period
-7.6628.35
Average insured
production (mt)
10,906,55110,933,98214,948,581
% Of insured/insurable
production
80.1670.1964.22
% Of increaseinsured
productioncompared with
previousperiod
0.2537.06
Average insurable
production (mt)
13,605,82015,576,60823,275,880
00-09
0
2,000,000
90-9980-89
4,000,000
6,000,000
Increase in Insured Area (ha)
00-09
0
5,000,000
90-9980-89
10,000,000
15,000,000
20,000,000
Increase in Insured Production (mt)
EVOLUTION AND IMPLEMENTATION IN EXTENSIVE HERBACEOUS CROPS
There is no doubt of the importance this sector holds for our
country, representing around 11% of final plant production.
This section refers to the most representative stone and pome
species in agricultural insurance: peach, apple, pear, apricot
and plum. Their average production in recent years has been
around 3 million tons, representing around 85% of the total
amount of all the species in the fruit sector.
Its importance has become evident in agricultural insurance
due to the high number of insurance options (combined
insurance, farm insurance and yield insurance), reaching a
high level of development and improvement that covers
almost all weather-related risks.
Decades
80-8990-9900-09
Averageinsurablearea (ha)
170,908223,156213,950
Averageinsured
area (ha)
26,80598,336116,606
% Ofinsured/
insurable area
15.6844.0754.50
% Of increase in insured
area compared
witch previus period
266.86335.02
Average insured
production (mt)
322,9821,424,1712,057,832
% Of insured/insurable
production
15.3054.6572.87
% Of increaseinsured
productioncompared with
previousperiod
340.94537.13
Average insurable
production (mt)
2,110,4362,606,0482,824,140
EVOLUTION AND IMPLEMENTATION IN FRUIT TREES
00-09
0
20,000
90-9980-89
40,000
60,000
80,000
100,000
120,000
140,000
Increase in Insured Area (ha)
00-09
0
1,000,000
90-9980-89
2,000,000
3,000,000
Increase in Insured Production (mt)
The consolidation of farm insurance has been decisive in its
evolution. Since its implementation in 1999, this type of
insurance has incorporated new risks and a frost risk cover
at a reduced price as it covers damage for the entire farm
and not by plot, as is the case with combined insurance. This
situation, together with the preferential subsidies policy in
favour of insurance lines that offer greater protection to
agricultural and livestock farmers, have contributed to the
expansion of insurance in this sector.
47
48
EVOLUTION AND IMPLEMENTATION IN CITRUS FRUITS
This sector, which is also of great importance in the Spanish
Agricultural System, comprises the most important fruit tree
group with regard to fruit growing area (60.9%), followed
by the stone and pome fruit trees with 11.7%.
By species, the orange tree is the crop with most citrus area,
covering 50% of the total area, followed by the tangerine
tree with 36% and, to a lesser extent, the lemon tree with
13%.
The main production area is the Community of Valencia with
60% of the total area. Andalucía and the Murcia region are
the Communities with the most implementations of this
crop, with 25% and 14% respectively.
The strong growth of the procurement of citrus fruit
insurance, since its appearance until today, is due to highly
varied factors that could be summarised into a gradual
improvement and adaptation of the insurance lines to the
farmers' specific needs and to the crops' particular
characteristics.
Thus, in 1985, a general loss occurred due to a frost in all
the citrus fruit areas which made it possible to gather enough
information to redistribute, in the 1990s, the zoning of the
rates for this risk by polygon on the survey map in the
provinces of Valencia, Castellón, Murcia and Sevilla. A review
was also carried out during these years on the citrus fruit
insurance rates and the following risks were included in the
insurance covers: persistent rain, torrential rain and flood. At
the end of this decade, the new Pixat insurance for Citrus
Fruit Producer Organisations was implemented.222222222
The leap into the following decade was accompanied by
significant changes. To begin with, farm insurance came into
being. From this moment on, the cover of damage to fruit
due to adverse weather conditions was handled by plot as
well as by farm. Adjustments were made to the cover periods.
Thus, the start of hail risk covers was made earlier, 20 April,
and the end of the cover periods for each of the crops and
varieties were adapted to their harvesting cycles. On the
other hand, an exceptional cover extension was established
in relation to hail for citrus farmers that had already procured
insurance the season before, as well as an annual cover
period for the death or total loss of trees caused by risks
covered in the production.
Also noteworthy during this decade were the reviews carried
out on the specific loss adjustment rules, due to the
modification of the assessment tables for quality damage
caused by frosts, hail and wind
49
Decades
80-8990-9900-09
Averageinsurablearea (ha)
231,981257,897290,314
Averageinsured
area (ha)
17,11680,852182,963
% Ofinsured/
insurable area
7.3831.3563.02
% Of increase in insured
area compared
witch previus period
372.37968.94
Average insured
production (mt)
345,0081,385,4772,603,088
% Of insured/insurable
production
9.0427.3543.08
% Of increaseinsured
productioncompared with
previousperiod
301.58654.50
Average insurable
production (mt)
3,818,0715,065,0716,042,380
00-09
0
50,000
90-9980-89
100,000
150,000
200,000
Increase in Insured Area (ha)
00-09
0
1,000,000
90-9980-89
2,000,000
3,000,000
Increase in Insured Production (mt)
EVOLUTION AND IMPLEMENTATION IN WINE GRAPES
A downward trend has been the main characteristic of the
evolution of area occupied by vineyards, especially from 1990
to today. Nonetheless, vineyards are placed third with regard
to area occupied by Spanish crops, behind cereals and olive
groves. With around 1.16 million hectares, we are the country
with the largest area of vineyards in the world. ss
With regard to distribution, it is worth noting that 51% of
the area occupied by vineyards is primarily located in Castilla-
La Mancha. Far behind are the Autonomous Communities
of Extremadura, Valencia and Castilla y León, which together
represent 21%.
50
00-09
0
100,000
90-9980-89
200,000
300,000
400,000
Increase in Insured area (ha)
00-09
0
500,000
90-9980-89
1,000,000
1,500,000
2,000,000
2,500,000
Increase in Insured Production (mt)
Although the greatest number of modifications made to
wine grape insurance have occurred during the last decade,
there are still some notable changes that took place during
the previous decades.
For example, as a result of Spain's entry into the EEC, from
the mid-1980s to the 1990s, the insurance prices had to be
raised in order to bring them in line with the Community
prices. The 1980s saw the inclusion of the risk of wilting
within the scope of production of the Bobal variety. And at
the end of the 1990s, the risks of persistent rain, torrential
rain and flood were included.
During the last decade, insurance plans have started providing
cover, with price differences, for quality damage caused by
hail for those areas and varieties that belong to quality
Designations of Origin. Likewise, and as a result of the strong
persistent rains that were recorded in the Communities of
Castilla-La Mancha, Andalucía, Extremadura and Madrid,
policies began to include cover for mildew risk. Lastly, the
new Farm Insurance was created, which covers any
uncontrollable adverse weather conditions on dry farming
plots, in other words, the same risks that are covered in
traditional combined insurance, plus drought risk.
At the end of this decade, a new cover was included for
vineyards belonging to certain Designations of Origin, which
were dedicated to producing high-value grapes. These
vineyards are called "Vineyards with specific characteristics"
in the insurance policy. The wildlife risk is also included in
the insurance covers.
Decades
80-8990-9900-09
Averageinsurablearea (ha)
1,562,0831,248,6751,131,027
Averageinsured
area (ha)
175,850294,768328,344
% Ofinsured/
insurable area
11.2623.6129.03
% Of increase in insured
area compared
witch previus period
67.6286.72
Average insured
production (mt)
988,6041,899,7312,202,341
% Of insured/insurable
production
18.4338.1234.94
% Of increaseinsured
productioncompared with
previousperiod
92.16122.77
Average insurable
production (mt)
5,364,8564,983,1946,303,928
51
Decades
80-8990-9900-09
Averageinsurablearea (ha)
311,928299,390352,432
Averageinsured
area (ha)
16,22940,67773,355
% Ofinsured/
insurable area
5.2013.5920.81
% Of increase in insured
area compared
witch previus period
150.65352.00
Average insured
production (mt)
1,757,4851,496,8983,160,841
% Of insured/insurable
production
27.5218.3524.29
% Of increaseinsured
productioncompared with
previousperiod
-14.8379.85
Average insurable
production (mt)
6,385,3828,157,89413,012,151
EVOLUTION AND IMPLEMENTATION IN VEGETABLES
00-09
0
20,000
90-9980-89
40,000
60,000
80,000
Increase in Insured area (ha)
00-09
0
1,000,000
90-9980-89
2,000,000
3,000,000
4,000,000
Increase in Insured Production (mt)
Over these last three decades, the vegetable sector has
evolved from a latifundium system (with large properties and
few owners) and atomized distribution to a concentration of
producers in large horticultural centres that depend on or
supply the large food chains. For example, in the year 2000,
vegetable production in tons was 28% higher than that of
the 1985 harvest and nevertheless, the amount of farmed
hectares dropped 18% between these two years.
On the other hand, Spain's entry into the EEC in the mid-
1980s helped strengthen our position as one of the world's
most solvent markets. Spain became the top fruit producer
in Europe and the second vegetable producer, after Italy.
As a result of the mechanisation of countless processes,
especially harvesting, the open field vegetables grown for
industry and those called early vegetables were at this time
the ones that prevented a drop in the production of this crop
and increased its relation with regard to the gross value of
the final agricultural production.
The evolution of insurance has gone hand in hand with the
sector's development. Since the 1980s to today, we have
progressed from insurance with vaguely-defined risks (wind,
rain, frosts in all areas and productions) to a stabilisation of
the risks in the second decade. In this third decade which is
now coming to a close, the risks are handled with increasing
specificity.
One of the more important phenomena that the vegetable
insurances have experienced is the change of the production
systems of certain crops. In the case of winter tomatoes, for
example, we have progressed from production that was 95%
open field farming during the 1980s to having that same
percentage represent greenhouse farming in the present day.
52
Decades
80-8990-9900-09
Averageinsurablearea (ha)
2,047,8192,141,1852,371,057
Averageinsured
area (ha)
19,31056,445143,463
% Ofinsured/
insurable area
0.942.646.05
% Of increase in insured
area compared
witch previus period
192.31642.95
Average insured
production (mt)
51,062118,966338,254
% Of insured/insurable
production
1.503.576.64
% Of increaseinsured
productioncompared with
previousperiod
132.98562.44
Average insurable
production (mt)
3,399,4493,333,3095,095,000
EVOLUTION AND IMPLEMENTATION IN OLIVE GROVES
00-09
0
50,000
90-9980-89
100,000
150,000
200,000
Increase in Insured area (ha)
00-09
0
100,000
90-9980-89
200,000
300,000
400,000
Increase in Insured Production (mt)
In this sector, Spain is the country that produces the most
olive oil and table olives in the world. This leading position
is related to the large area dedicated to olive groves (only
surpassed by cereal crops) primarily located in the
Autonomous Community of Andalucía and basically
dependent on the plant's weather-related demands.
As regards its production, the upward trend is due to greater
productivity, owing to the improved handling techniques as
well as to the impact of the implementation of irrigation in
an increasingly greater number of farms, amongst other
factors.
Unlike the rest of the previously-mentioned crops, its
implementation is low. The possible causes for this, up until
the creation of yield insurance for olive groves for the 2001
harvest, were primarily the low feeling of risk regarding the
covered risks and specifically hail, given its low incidence in
the main crop area due to the favourable weather conditions
there.
During this last decade, the improvements made to yield
insurance, and especially the review and improvement of
customised yield for insurance purposes, have increased the
implementation percentage.
53
YEAR ANIMALS
1980 0
1981 0
1982 832
1983 1,197
1984 12,265
1985 19,015
1986 19,958
1987 16,489
1988 12,716
1989 10,201
1990 24,151
1991 64,125
1992 102,463
1993 297,923
1994 588,215
1995 837,389
1996 879,908
1997 885,908
1998 881,214
1999 948,466
2000 1,513,176
2001 2,344,654
2002 3,243,352
2003 3,537,877
2004 9,321,213
2005 13,899,308
2006 9,818,178
2007 9,626,585
2008 8,937,086
2009 10,893,124
EVOLUTION OF THE NUMBERANIMALS INSURED (1)
Taking into account the figures shown in the table, we can
see the years during which the number of insured animals
notably rises. The first time we witnessed this phenomenon
was in 1983, although it was even more obvious in 1984.
This is due to the fact that it was during these years when
cattle insurance was created for fattening farms.
During this first decade, the number of insured animals
remained constant despite the creation in 1987 of insurance
to cover the African swine plague. The term of this insurance
was short since Spain was officially declared an area that was
free of this disease in 1989, a year during which, together
with the previous year, the number of insured animals slightly
dropped.
The current insurance for pig farms began with the 2008
Plan, covering the death or mandatory slaughter of animals
as a result of accidents, foot-and-mouth disease, classic swine
fever and Aujeszky's disease, in addition to compensation
for animal immobilisation.
Currently, all livestock sectors, especially the pig sector, are
dealing with a serious crisis due to the sharp increase in
production costs. As a result, livestock farmers are
reconsidering whether or not to procure insurance, which
has led to low implementation.
It is important to highlight the increase that occurred
between 1991 and 1995 as a result of the creation of two
insurances to cover sheep, select or not, and of a series of
improvements made to cattle insurance with regard to covers
and to animal values for insurance purposes.
During this last decade, the creation of insurances for cattle
breeding and rebreeding farms (1999 Plan), sheep farms
3.3 Insured animals
(1) The C&D lines and aquacultureare not included.
54
(2000 Plan), fighting-bull farms, fattening farms, BSE and
drought affecting grazing lands (2001 Plan) caused the
number of insured animals to triple.
Lastly, the increases in procurement of insurance that
occurred during 2004 and 2005 are primarily due to the
creation of insurance for meat-producing poultry farms and
to the weather conditions in 2005 (heavy drought), which
increased the feeling of risk, causing a 329% increase in the
number of insured animals, in comparison with the previous
year in the insurance line for drought affecting grazing lands.
Below is an analysis of the evolution of insurance
procurement over these 30 years for the most significant
livestock (cattle, sheep and goats) given that the covers for
the rest of the species (poultry, horses and pigs) are still being
developed, even though specific insurances do exist.
Cattle is of great importance in the livestock sector,
representing over 25% of final livestock production.
The extensive reorganisation that this sector has experienced
since the 1990s, due to reasons like the evolution of the
Common Agricultural Policy (CAP), has given rise to effects
such as the disappearance of numerous dairy farms, a greater
concentration and expansion of those that still exist and a
certain movement towards meat-producing animals.
With regard to distribution, the dairy cattle farms are primarily
located in the northern part of the Peninsula, in the
Autonomous Communities of Galicia, Castilla y León, Asturias
and Cantabria. As for the meat-producing farms, those
dedicated to fattening animals are mostly located in Aragón,
Cataluña and Castilla y León, while the suckler cattle farms
are distributed primarily throughout Andalucía, Extremadura
and Castilla y León.
Although insurance for the cattle sector has existed since the
System was founded, it wasn't until the end of the 1990s,
with the creation of insurance for breeding and rebreeding
farms, that a very positive response was recorded in the
sector. Its implementation during the four years following its
creation tripled. This insurance extensively changed the
previous one in two basic aspects: with regard to the covers,
including accidents and the main illnesses that concerned
livestock farmers, and with regard to processing, simplifying
the management of the commerc ia l network
EVOLUTION AND IMPLEMENTATION IN CATTLE
Decades
80-8990-9900-09
Average insurableanimals
5,018,7504,367,5726,177,293
Average insuredanimals
11,584262,240
1,222,749
% Of insured/insurableanimals
0.236.0019.79
% Of increase in insuredanimals compared with
previous period
2,163.8310,455.60
00-09
0
500,000
90-9980-89
1,000,000
1,500,000
Increase in Insured Animals
56
EVOLUTION AND IMPLEMENTATION IN SHEEP / GOATS
Decades
90-9900-09
Average insurableanimals
23,372,01925,921,401
Average insuredanimals
329,3941,695,639
% Of insured/insurableanimals
1.416.54
% Of increase in insuredanimals compared with
previous period
414.77
0
500,000
00-0990-99
1,000,000
1,500,000
2,000,000
Increase in Insured Animals
Of all the livestock productions, the sheep-goat sector
represents 8%, which is almost 3% of Spain's final
agricultural production.
There has been a downward trend in this sector during this
last decade, which is resulting in a restructuring and
reorganisation process due to both situational and structural
reasons (reduction in the censuses following the application
of the CAP reform).
The more noteworthy situational reasons are the outbreak
of blue tongue disease during 2007 in certain areas and the
increase in prices of raw materials for feeding animals which,
coinciding with a period of unusually low prices, has caused
a drop in the sale margins and thus in the farms, although
those which still exist tend to have a greater number of
animals.
By Autonomous Communities, the larger censuses are in
Castilla y León, Castilla-La Mancha, Andalucía and Aragón,
which all together represent around 80% of the total census
of goat and sheep species.
The year 1993 saw the start of this type of insurance in the
System and it was during the 2000 season, with the creation
of the Sheep and Goat Farm Insurance, that there was strong
growth in comparison with the previous decade. This
insurance introduced significant changes with regard to the
previous insurances, like the increase in animal values for
insurance purposes and the inclusion of covers, such as
compensation for l ivestock cul l ing (brucel losis).
57
3.4 Insurance for the collection anddisposal of dead farm animals(C&D)
The danger that the outbreak of Bovine Spongiform
Encephalopathy (BSE), better known as “mad cow disease”,
signified for public health, made it evident that there was a
need to create an effective system for the collection and
disposal of dead animals on Europe's livestock farms. In order
to prevent diseases from spreading amongst the animals and
avoid the possibility of a subsequent outbreak in humans,
the EU created specific regulations in 2002 that set forth the
steps that the farmers should take in order to destroy the
carcasses of their animals.
Since then, the fulfilment of these obligatory processes in
Spain has been carried out through the Agricultural Insurance
System. Through this System, farmers take out insurance
that covers the expenses incurred from the collection and
disposal of the dead animals on their farms. The process for
collecting and disposing of the carcasses is carried out by a
series of management entities authorised by the Autonomous
Communities, at prices that both parties negotiate in
advance.
From the insurer's point of view, the collection and disposal
of dead animals on the farm take the form of livestock
farmer assistance insurance, which is evident when one
analyses the different parameters that are included in the
process.
Furthermore, as an added value, this service guarantees that
the entire process (from the farmer's request to collect the
animals until their disposal) is carried out in accordance with
the legal procedures and that the animals are moved under
optimal conditions in order to minimise the impact on the
environment and the risks that this activity can impose on
public health. This service also eliminates inconveniences for
the Community.
YEARINSURED INSURABLE
ANIMALS/PLACES ANIMALS/PLACES
2001 508,306 155,000
2002 65,062,186 17,071,698
2003 89,173,446 49,542,140
2004 145,948,574 79,274,377
2005 200,821,329 169,052,392
2006 225,319,506 207,071,236
2007 233,158,746 222,539,820
2008 232,285,712 231,142,286
2009 266,039,343 249,838,617
EVOLUTION OF INSURED AND INSURABLEANIMALS UNDER C & D
Since its implementation in the 2001 Plan, its growth during
the following years has been due to the incorporation of
almost all the Autonomous Communities and the inclusion
of different species. As a result, implementation exceeded
93% in the year 2009.
The notable increase in insured animals/places that occurred
in 2005 is due to the entry into the insurance of various
Autonomous Communities like Andalucía, Aragón, Valencia
and Galicia, with a high number of livestock species, such as
sheep, goats, pigs, poultry and rabbits.
4Subsidies forinsurance prices
One of the three main characteristics of the Spanish
Agricultural Insurance System is the Public Administrations'
involvement in the cost of insurance. In other words, the
State makes a contribution, via direct subsidies, to agricultural
and livestock farmers in order to pay a substantial part of
the price which, as in any other branch of insurance activity,
must be paid by the insured party in return for the insurance
cover bought from the insurance company.
This State contribution, which is validated by the European
Union Authorities and is about 53% of the final cost of the
insurance, has been, and continues to be, a deciding factor
in guaranteeing the System's development.
As shall be seen later in this chapter, this development has
had two clearly distinct phases within the context of the
development of the State of the Autonomous Communities
as established in the Constitution of 1978. Initially the weight
of the subsidies was borne almost entirely by the General
Budget of the State. Nowadays it is alleviated and
complemented by the aid granted by the different
Autonomous Communities according to the weight and
importance that agricultural activity represents in each
Community, and to the budgetary limitations at any given
time.
This institutional support has been constant since 1980 and
is aimed at agricultural professionals (the agricultural
insurance subsidy is the only subsidy given automatically
once the respective insurance application form has been
presented). Furthermore, it has been perfected by another
means which strongly reflects the degree of collaboration
between the public and private sectors in this System: the
Subsidy Settlement Agreements which were signed between
ENESA and the various Departments of Agriculture in the 17
Autonomous Communities and AGROSEGURO on behalf of
the Pool. As a result, the agricultural or livestock professional
only pays the net price at the time of purchasing the
insurance, i.e. the final cost of the insurance less the State
and Regional subsidies applicable in each case.
4.1 ENESA - Spanish agriculturalinsurance entity
As already explained in chapter two, ENESA is an
Autonomous entity under the Ministry of the Environment
and Rural and Marine Affairs (MARM). Its main duties include
establishing the subsidy percentages to be applied to the
agricultural insurance premiums based on two main
parameters: the type of agricultural or livestock productions
that are to be insured, usually divided into six groups, and
the different characteristics of the agricultural or livestock
farmer carrying out the activity.
Therefore, starting with a “base subsidy” for each production
type, the subsidy will increase according to the characteristics
of the subsidy recipient (farmer whose main occupation is
farming, young farmer, insurance purchased in previous
years, etc).
60
YEAR MILL. €
1980 0.59
1981 10.31
1982 12.50
1983 18.68
1984 37.47
1985 31.42
1986 22.13
1987 28.12
1988 36.43
1989 53.79
1990 63.85
1991 77.11
1992 92.81
1993 90.47
1994 102.07
1995 93.92
1996 113.37
1997 105.95
1998 123.78
1999 111.26
2000 131.88
2001 139.31
2002 195.50
2003 209.05
2004 209.36
2005 278.17
2006 282.17
2007 303.43
2008 304.12
2009 286.69
TOTAL 3,565.71
61
OVERALL ENESA CONTRIBUTION
TO AGRICULTURAL INSURANCE
In short, it is a procedure which makes purchasing insurance
easier while respecting the Central Government's policy with
regard to agricultural insurance subsidies. It “relieves” the
insured party from paying the total price, leaving the
representative of the insurance companies, AGROSEGURO,
with the task of “claiming” from the government the subsidy
amount which pays the rest of the overall price of the
insurance that has been purchased.
At the same time, this payment procedure makes it possible
to check that all the information provided by the insured
party in the “insurance application form”, which is also the
subsidy application document, is correct and meets the
criteria set out in the corresponding annual Ministerial Order
concerning subsidies.
The first Agreement of this type signed between ENESA and
AGROSEGURO dates from November 1980. Since then, this
Agreement has been adapted as the management of the
Agricultural Insurance System itself has evolved.222222
As previously mentioned, the Autonomous Communities
join the System by contributing from their Budgets, thus
complementing the subsidy granted by the Central
Government and making it possible for them to support in a
more concrete manner those vegetable or livestock
productions that are most important for their particular
Autonomous Community.
Initially, the procedure that was followed involved subsidising
a percentage of the total cost of the insurance for the
Community's main productions.
Today, the procedure involves establishing a percentage of
the subsidy total set by ENESA, so that the two subsidies do
not exceed the limits set by European Community legislation.
62
4.2 Autonomous Communities
0
50
100
150
200
250
300
1980
1981
1982
1983
1984
1985
1986
1988
1989
1990
1987
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
350
EVOLUTION OF ENESA’S ANNUAL CONTRIBUTION TO AGRICULTURAL INSURANCE
2009
Value in millions of euros.
63
AUTONOMOUS COMMUNITIES
Government of ANDALUCÍA
Government of ARAGÓN
Principality of ASTURIAS
Government of the ISLAS BALEARES
Autonomous Community of the CANARIAS
Autonomous Community of CANTABRIA
Autonomous Community of CASTILLA-LA MANCHA
Autonomous Community of CASTILLA Y LEÓN
Generalitat of CATALUÑA
Generalitat of VALENCIANA
Autonomous Community of EXTREMADURA
Government of GALICIA
Autonomous Community of LA RIOJA
Autonomous Community of MADRID
Autonomous Community of MURCIA
Autonomous Community of NAVARRA
Refional Government of VIZCAYA
TOTAL CONTRIBUTION FROM THE COMMUNITIES
TOTAL MILL. €
100.39
154.21
16.39
5.02
57.05
0.38
82.26
146.66
106.63
252.50
85.09
50.74
28.49
11.11
49.30
60.92
2.37
1,209.50
Value in millons of euros.
Just as the Central Government has done, the different
Autonomous Communities have signed Partnership
Agreements with AGROSEGURO for these subsidies. These
are Agreements that generally follow the same criteria as
those of the Central Government. In this way, it is possible
to ensure that the recipients of the subsidies meet all the
requirements officially set.
The first Partnership Agreement between an Autonomous
Community and AGROSEGURO was signed in December
1987 with the Autonomous Community of Aragon. The last
one was signed in 2009 with the Community of Cantabria,
thus rounding off the agreements with all the Communities
which are part of this management and control procedure.
Similarly, and as was the case for the ENESA Agreement, all
of the Communities have been adapting to the evolution
and development exper ienced by the System.
FINANCIAL CONTRIBUTIONS MADE BY THE AUTONOMOUS COMMUNITIES
TO AGRICULTURAL INSURANCE DURING THE 1988-2009 PERIOD
64
4.3 The total subsidy forinsurance cost comparedwith premiums
Factor as important as the subsidising of the insurance price
in the development of agricultural insurance must be included
in the evolution of the System itself, as well as of other
parameters such as the incorporation into the European
Union, with its regulations concerning state aid, the evolution
of the agricultural structures over the past thirty years and
the budgetary limitations of both the Central and Regional
governments.
EVOLUTION OF THE ANNUAL CONTRIBUTION FROM THE AUTONOMOUS COMMUNITIES TO
AGRICULTURAL INSURANCE
0
20
40
60
80
100
120
1988
1989
1990
1991
1992
1993
1994
1996
1997
1998
1995
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
140
Value in millons of euros.
In any case, subsidies for insurance cost have continued to
be that factor of “agricultural management policy”
suggested by the first section of the Agricultural Insurance
Act of 1978.
65
An equally important factor has been the need to comply
with the regulations set by the European Union regarding
the extent of the subsidy that can be awarded, which can
reach 80% of the price of the insurance when covering
losses caused by natural disasters or adverse weather
phenomena that are considered natural disasters, or just
50% when covering risks that are not classified as potentially
catastrophic risks, combined with others that may cause
losses of this kind.
0
50
100
150
200
250
300
350
400
450
EVOLUTION OF THE ANNUAL CONTRIBUTION (ENESA + AUTONOMOUS COMMUNITIES)TO AGRICULTURE INSURANCE
1980
1981
1982
1983
1984
1985
1986
1988
1989
1990
1987
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Value in millons of euros.
66
YEAR
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
ENESA
0.59
10.31
12.50
18.68
37.47
31.42
22.13
28.12
36.43
53.79
63.85
77.11
92.81
90.47
102.07
93.92
113.37
105.95
123.78
111.26
131.88
139.31
195.50
209.05
209.36
278.17
282.17
303.43
304.12
286.69
AUTONOMOUSCOMMUNITIES
1.83
8.11
10.44
15.49
21.63
22.25
25.13
24.08
34.44
31.86
37.42
35.98
46.28
48.04
75.50
80.51
83.47
111.28
121.21
127.54
132.92
114.10
POLICY-HOLDER
0.82
10.29
10.69
17.66
33.07
37.61
36.04
40.78
50.23
50.54
55.98
66.66
77.73
71.40
86.72
90.10
121.03
127.03
176.89
157.12
172.96
168.12
195.33
213.99
231.79
272.88
260.67
299.28
305.55
315.47
TOTAL COST
1.41
20.60
23.19
36.33
70.54
69.03
58.17
68.90
88.49
112.44
130.27
159.26
192.16
184.12
213.91
208.11
268.84
264.83
338.09
304.36
351.12
355.48
466.32
503.56
524.62
662.34
664.05
730.25
742.59
716.26
Vaue in millons of euros.
FINANCIAL CONTRIBUTION MADE BY ENESA, THE AUTONOMOUS COMMUNITIES AND POLICY HOLDERS
IN RELATION TO THE TOTAL COST
The Spanish System has managed to combine all of these
regulations through its Combined Agricultural Insurance
System. At the same time, it has had to adjust to financial
and economic circumstances in order to establish the
0%
20%
40%
60%
80%
100%
1980
1981
1982
1983
1984
1985
1986
1988
1989
1990
1987
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
CONTRIBUTIONS FROM THE ADMINISTRATIONS TO THE COST OF AGRICULTURAL INSURANCE
2009
ENESA A.C. POLICY HOLDER
67
necessary totals for subsidising the price of the insurance in
each of the last thirty financial years.
5 Purchasing anddistribution
70
One of the most interesting, and quite possibly most
original characteristics of the Spanish Agricultural Insurance
System is that the insurance companies that belong to the
pool cannot deny insurance to any agricultural or livestock
farmer who wants to be insured by this System, as long as
the farmer meets the formal requirements stipulated, year to
year, in the Annual Plans and the Ministerial Orders that
complement them. These Plans and Orders set forth the
different requirements that must be fulfilled if one wants to
be entitled to receive a certain percentage of the subsidy.
Thus, it is a System in which the insurance company does
not previously select its clients, but rather the clients, in this
case the professional farmers, know when they purchase the
insurance that if they do not meet the “minimal technical
conditions” for farming or “handling” of the livestock that
are included in the policy's terms and conditions, coverage
of the loss could be denied when the damage is assessed by
the adjusters.
Under these circumstances, and given the type of insurance
selected by the legislator (co-insurance, which determines
the basic uniformity of the premium offered by the co-
insurance companies grouped in the pool), marketing is the
most important factor around which the activity of these
companies normally revolves, since their ability to attract
clients is what will reflect their business contribution to the
co-insurance pool. In turn, the volume of business contributed
is the most important criteria for determining their
participation in the co-insurance pool year after year and,
consequently, their share in the activity's final annual result.
This chapter will analyse the System's evolution from three
different viewpoints: the policies, premiums and sums
insured; the various types of policy holders; and the channels
of distribution for these insurances, an activity that requires
clear specialisation of the different brokers.
5.1 Purchasing agriculturalinsurance
Several indicators that demonstrate the importance and
evolution of agricultural insurance in Spain come from
economic data (accrued net premium, sum insured, etc.),
which is derived from the purchasing of policies by the
different subsectors, as well as from the economy's general
evolution, the weather conditions during the previous year
and, very important, by the ongoing improvements
introduced into the different covers offered by the System.
Below is a summary, presented step by step, of the most
relevant aspects of the System's evolution, which have made
it possible for the System to reach its current level of
development.
As already mentioned in Chapter 3, in 1980, the first year
of the System, three hail insurances were created in order
to cover grape, tobacco and apple productions. The 1981
Insurance Plan incorporated five new types of insurance.
These included the combined winter cereal insurance, for
which over 225,000 insured parties took out policies during
its first year.
In 1982 twelve agricultural insurances and one livestock
insurance were integrated into the System. The primary new
71
development during this time was that the experimental
insurance for winter cereals became “integrated”(1).
Premiums rose 10.9%, which was notable growth despite
the harvest reductions, especially that of cereals due to the
drought.
YEAR AGRICULTURE LIVESTOCK AQUACULTURE C & D TOTAL
1980 1.15 1.15
1981 16.64 16.64
1982 18.43 0.03 18.45
1983 28.55 0.03 28.58
1984 53.99 0.43 54.42
1985 52.48 0.73 53.21
1986 47.09 0.87 47.96
1987 55.05 0.80 55.85
1988 70.34 0.53 70.87
1989 87.46 0.33 87.80
1990 102.10 0.91 103.01
1991 122.41 2.24 124.66
1992 144.33 3.55 147.88
1993 134.81 5.88 140.69
1994 151.19 9.94 161.13
1995 141.67 15.44 157.11
1996 188.54 17.95 206.49
1997 183.76 19.62 0.03 203.41
1998 205.17 23.27 0.05 228.48
1999 212.66 23.00 0.18 235.84
2000 247.48 32.94 0.52 280.94
2001 231.52 40.36 0.81 0.73 273.42
2002 254.71 54.86 1.78 45.99 357.33
2003 283.67 56.51 2.44 65.55 408.16
2004 298.47 60.98 2.35 76.82 438.63
2005 326.18 67.79 2.56 103.09 499.62
2006 367.66 83.42 2.20 141.15 594.43
2007 373.89 72.09 1.77 150.50 598.24
2008 448.32 73.82 2.22 154.02 678.37
2009 413.67 76.36 2.69 157.25 649.98
Value in millons of euros.
EVOLUTION OF THE VALUE OF ACCRUED NET PREMIUM BY SUBSECTOR
(1). This means it covers all kinds of adverse weather conditions. The yield is fixed by areas, crops and varieties, as well as the premia. It covers the difference
between the total guaranteed harvest of the entire exploitation and the actual harvest obtained (the assessment is done by means of compensation between
plots)
72
Amongst the main new developments in 1983, the expansion
of the integrated winter cereal insurance to cover the entire
country and the inclusion of frost and hail insurance for the
pear and cherry productions are particularly noteworthy.
With regard to the livestock sector, the covers for cattle were
expanded and insurance for the pig sector was incorporated,
which covered African swine plague. Premiums recorded an
overall growth of 55% with growth of over 100% for most
of the agricultural crops, except in livestock, for which the
purchasing of insurance remained low.
In 1984, still more new productions and insurance covers
were incorporated, like the expansion of vegetable insurance
to include ten new crop species and the specific plum, table
grape and protected crop insurances. As in the previous year,
there was a significant increase in the purchasing of insurance
(90%), with the increases in the integrated winter cereal
(10,027%, in comparison with the accumulated figure from
the 1980-1993 period) and cherry (298%) insurances being
worthy of mention.
The agricultural sector's situation in 1985 was characterised
by a drop in the wheat, horticultural, grape and olive
productions. On the other hand, the good harvest of fruits,
including citrus fruits, with an increase of over 20% in
comparison with the previous year, was of special note. The
purchasing of insurance during this year dropped slightly by
about 2% in comparison with 1984, while winter cereal
insurance recorded its worst performance with a reduction
of around 57%.
Value in millons of euros.
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
500
450
400
350
300
250
200
150
100
50
0
EVOLUTION OF THE VALUE OF ACCRUED NET PREMIUM BY SUBSECTOR
AGRICULTURE AQUACULTURELIVESTOCK C & D
73
With regard to 1986, it is worth noting that even with a
cultivated cereal area similar to that of the previous season,
there was a drop in production of around 28% primarily due
to the adverse weather conditions. In general, almost all the
agricultural products experienced large reductions. And
logically, a 10% drop was recorded in the premiums paid for
purchased insurance.
Agricultural income during 1987 rose 17.1%, primarily due
to the favourable weather conditions and Spain's entry into
the EEC. Agricultural productions were noteworthy during
this year as a result of the increase in the area and
productions of crops like cereals, pear, apple, olives, citrus
fruits and wine grapes, with final agricultural production
experiencing a 7.2% growth. As a reflection of this situation,
premiums rose 17% overall and especially with regard to
integrated winter cereal insurance, which increased by 95%
in comparison with 1986.
The economic results of 1988 show a clearly positive balance
for Spanish agriculture. Cereal production reached its highest
level to date with more than 23 million tons, citrus fruit
production rose 4.7% and industrial crops recorded increases
of over 17%. On a negative note, there was a high reduction
in the wine grape harvest due to a strong presence of mildew.
This situation signified a notable increase in the volume of
premiums, around 27% compared to the previous year,
although the variation was quite different amongst the
various insurance lines. Of special note were the increases
related to cotton (516.85%), apricot (109.7%) and winter
cereals (59.9%).
The results from 1989 in the agricultural sector can be
classified as negative in comparison with other sectors, due
to the drop in final agricultural production (5.5%) as a result
of the unbalanced weather patterns that caused a drought
at the start of the season and excessive rain at the end. The
farming subsector dropped by 7.8% and final livestock
production, by 2.3%.
The premiums paid to the System continued their upward
trend, with insurance line increases of 178% in the case of
the wine grape. Nevertheless, this year saw a 26% increase
in loss compared with the previous year, which was primarily
caused by the drought that adversely affected the cereal
harvest.
The year 1991 was characterised by a 1.48% drop in final
agricultural production, although a 3.5% increase was
recorded for agricultural income per person in real terms.
This was due to the good results obtained with cereals and
olive oil and to the larger subsidies from the EEC.
During this year, the growth that had started two years prior
was further supported with an over 21% increase in
premiums. Although the most important growth in absolute
figures was recorded in the insurance lines related to cereals,
wine grapes, peach and sweet orange, we must highlight
the increases in the insurances for fattening cattle and
breeding and rebreeding cattle by 473% and 274%,
respectively, in comparison with the previous year.
The overall result of the agri-food sector in 1993 was very
positive due to the effects of the Common Agricultural Policy
Reform, with agricultural income experiencing a 21%
increase. Nevertheless, the production situation barely
improved, with final agricultural production increasing only
2.3% from 1992.
74
Unlike the rest of the years, 1993 saw a reduction in
premiums of around 5% in comparison with 1992, which
was primarily a result of the sharp drop in cereal prices and
less pronounced drops in wine grapes and citrus fruits, with
fruit trees remaining the same.
The livestock sector saw an upward trend in cattle insurances
with increases of over 13% both with regard to policies and
insured animals, as well as the creation of insurance for
sheep.
The economic results of agricultural activity in 1995 were
affected by various factors, amongst which abnormal weather
patterns were particularly noteworthy. The consequences
included a sharp drop in the yields for dry farming and even
for irrigated farming, the areas of which were around
150,000 hectares less due to the harsh drought and scarcity
of water reserves. Likewise, the spring frosts caused high
losses for the vineyards and olive groves, as well as for the
cereal and pulse crops.
This situation, together with the adjustments made to cereal
prices and the maximum insurable yields in certain production
areas, caused a slight drop in the premiums (3%) paid during
this year and was cushioned by the better performance of
the cattle lines.
Unlike 1995, the economic results of agricultural activity in
1996 were positively affected by the good weather conditions
recorded this year, during which the rains supported strong
agricultural production growth.
This situation signified an increase of over 31% in premiums
compared with the year 1995. The integrated insurance for
cereal lines, combined grape and combined cereal lines
showed the best performance with increases of 64%, 38%
and 75%, respectively, in the sum insured in relation to the
previous year. The growth of the wine grape (22.5%),
tangerine (27.6%) and breeding and rebreeding cattle
(12.3%) lines offset the results of the System as a whole.
This year saw the best loss rate recorded during the thirty
years analysed.
For the year 1997, we must highlight the creation of the
cover for aquaculture risks by means of a specific insurance
line for turbot, sea bass and sea bream.
During the year 1998, final agricultural production in the
agri-food sector rose around 3.2% in comparison with the
previous year. The increase in agricultural production was
recorded at 3.7% while livestock production rose 2.5%.
75
Value in millons of euros.
YEAR AGRICULTURE LIVESTOCK AQUACULTURE C & D TOTAL
1980 22.17 22.17
1981 868.78 868.78
1982 858.30 3.26 861.56
1983 1,312.34 2.36 1,314.70
1984 1,854.10 16.91 1,871.02
1985 1,849.27 28.92 1,878.20
1986 1,730.00 33.32 1,763.32
1987 1,881.52 27.10 1,908.62
1988 2,312.86 24.54 2,337.41
1989 2,438.12 12.50 2,450.62
1990 2,469.47 23.13 2,492.60
1991 2,730.76 44.65 2,775.41
1992 2,639.55 80.57 2,720.13
1993 2,417.10 123.40 2,540.50
1994 2,702.04 205.93 2,907.97
1995 2,413.73 308.25 2,721.98
1996 3,630.48 328.72 3,959.21
1997 3,535.83 358.89 2.48 3,897.20
1998 4,612.62 421.09 0.83 5,034.55
1999 4,647.24 422.03 10.62 5,079.88
2000 5,217.91 555.21 10.31 5,783.43
2001 4,785.56 1,340.29 38.78 39.73 6,204.35
2002 4,973.60 1,670.59 67.01 1,334.93 8,046.13
2003 5,333.37 1,600.33 57.84 1,408.88 8,400.42
2004 5,513.29 1,801.18 56.63 1,600.98 8,972.09
2005 5,727.31 2,034.77 48.26 1,860.40 9,670.73
2006 5,640.34 1,778.33 43.60 1,814.12 9,276.38
2007 6,669.22 1,712.23 56.52 1,908.74 10,346.71
2008 7,485.19 1,730.50 62.90 1,875.55 11,154.14
2009 7,073.49 1,750.46 67.03 1,848.33 10,739.31
EVOLUTION OF THE SUM INSURED BY SUBSECTOR
76
This positive evolution was also reflected in the accrued
premiums (12% more than in the previous year). This was
the result of various factors, such as the increase in crop
prices, especially those of high value for insurance purposes,
like fruit trees and grapes, and the incorporation of new
types and covers of insurance that have been well-received
by the sector. The incorporation of flood cover for all the
insurance lines offered by the System also merits mention.
The year 2000 was characterised by an increase in final
agricultural production of 3.3% in comparison with 1999 as
a result of certain favourable weather conditions that made
a significant increase possible in the agricultural productions,
especially those of herbaceous crops, vineyards and olive
groves.
This year recorded an increase in premiums of over 19%,
with the best-performing line groups during the year being
cattle, fruit trees and herbaceous crops, which varied in
comparison with 1999 by 134%, 111% and 120%,
respectively.
Moreover, the current insurance lines improved, like the cover
for damage caused by persistent rain in cherries (spots or
blemishes), and new insurance lines were incorporated, like
those related to olive and beetroot yields and farm insurance
with a yield cover for extensive herbaceous crops.
As regards the livestock sector, the appearance of bovine
spongiform encephalopathy (BSE) was notable, as it
significantly changed the general conditions of livestock
activity.
During 2001, the most significant event was the ruin of the
winter cereal harvest that caused a drop from 19.8 million
tons to 12.5 million. On the other hand, final livestock
production rose 4.5%.
Of special note during this year was the incorporation of the
insurance line to cover damage caused by drought in grazing
lands used to feed cattle, as well as the insurance line to
cover the expenses incurred from the collection and disposal
of dead cattle on the farm, which at the end of the day has
become the System's most important line due to the volume
of premiums it brings in.
0
2,000
4,000
6,000
8,000
10,000
12,000
1980
1981
1982
1983
1984
1985
1986
1988
1989
1990
1987
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
EVOLUTION OF THE SUM INSURED
2009
Value in millons of euros.
77
In 2003, plant production was characterised by slight
increases in the productions of fresh fruit, citrus fruit and
grapes, which were not able to offset the sharp drop in the
production of olives and the group overall. The value of
livestock farming rose 5.2% thanks to the slight increase in
prices. The overall purchasing of insurance rose. The positive
YEAR AGRICULTURE LIVESTOCK AQUACULTURE C & D TOTAL
1980 2,204 2,204
1981 281,209 281,209
1982 242,607 39 242,646
1983 286,250 55 286,305
1984 394,037 569 394,606
1985 351,646 882 352,528
1986 272,597 925 273,522
1987 225,836 751 226,587
1988 236,765 481 237,246
1989 263,793 473 264,266
1990 278,704 700 279,404
1991 315,422 1,628 317,050
1992 302,842 1,934 304,776
1993 312,183 3,678 315,861
1994 307,103 5,022 312,125
1995 292,680 7,527 300,207
1996 344,816 6,647 351,463
1997 320,138 7,435 3 327,576
1998 327,643 6,883 2 334,528
1999 325,932 8,994 7 334,933
2000 355,087 12,041 19 367,147
2001 301,986 21,545 31 1,847 325,409
2002 300,127 28,173 34 111,371 439,705
2003 295,194 29,242 31 128,270 452,737
2004 294,800 32,000 35 147,203 474,038
2005 291,480 48,355 25 177,550 517,410
2006 276,757 34,426 14 167,211 478,408
2007 303,463 29,447 12 183,757 516,679
2008 289,958 26,933 7 189,720 506,618
2009 261,804 28,690 7 192,479 482,980
EVOLUTION OF THE NUMBER OF POLICIES BY SUBSECTOR
acceptance of new insurances for the collection and disposal
of dead animals on the farm (C & D) and the yield and fruit
farm insurances, which were 145% higher than in the
previous year, were of particular note.
78
Amongst the improvements introduced into the System, the
expansion of covers to include almost all adverse weather
conditions in citrus fruit productions and the creation of
potato income insurance are worthy of mention.
The year 2004 saw agricultural income at current prices rise
3.7% in comparison with 2003: the sectors that showed the
most positive evolution were the cereal, olive oil and pig
sectors.
With regard to the purchasing of insurance, an increase in
premiums of over 7% in comparison with 2003 was
recorded. Also of special note, just as in the previous year,
were the contribution of the C&D insurances that were
gradually introduced in the various Autonomous
Communities for the different animal species, and the yield
and fruit farm insurances, to which the herbaceous insurance
lines must be added, with increases of more than 9% in
purchased policies.
For the first time, an insurance line was incorporated for the
forest sector, which was aimed at agricultural plots converted
into forestland. Worthy of mention within the livestock sector
were the creation of poultry farm insurance, which was
placed at the disposal of poultry farmers and especially
covered "heat waves", and the expansion of the cover of
death caused by “any reason” in fattening cattle insurance.
The effect of the frosts and drought during 2005 (the worst
year of the decade weather-wise and the one with the worst
“claims to net premium” ratio) in addition to the rise in fuel
prices caused agricultural income to drop by 10.3% in
constant terms. This year saw reduced plant production as a
result of the bad weather conditions (drop of 12% in citrus
fruits and 36% in herbaceous crops). Nevertheless, the
System as a whole grew, primarily owing to the premiums
paid through the C&D and fruit sector insurances.
79
During 2008, the value of the branch of agricultural activity,
at basic prices, rose 2.5% due to the increases in plant
production and animal production (2.5% and 2.4%,
respectively).
The overall purchasing of insurance during this year was
characterised by the recovery demonstrated by citrus fruit
insurance with a 15% increase, placing it at the levels of
previous seasons. On the other hand, an increase in cereal
prices of around 62% and a 15% increase in insured
production gave rise to growth of over 70% in the integrated
and yield insurances.
Improved insurance conditions predominated in 2008,
including: the creation of new types of insurance for the
citrus sector; inclusion of the cover for lack of fruit setting in
the cherry crops in Caceres; new types of insurance for the
wood production lines, in which seedlings are included as
insurable products; the creation of a new insurance for cut
flower productions; the incorporation of foot-and-mouth
disease cover in cattle insurances that still did not have it;
and the creation of pig insurance which covers accidents and
Aujeszky's disease.
Lastly, in 2009, plant production value dropped 11.9% as a
result of both the prices and production volume. In turn, the
value of animal production dropped 9.4%. As a whole, the
System received 4% less in premiums, which reflected the
serious economic crisis that affected the country, especially
cereals (with around 20% less purchasing of insurance),
citrus fruits and wine grapes. This situation was offset by the
positive purchasing levels for fruit trees, olive groves and
especially the line covering drought that affect grazing lands,
which rose 102% in comparison with the previous year.
79
80
5.2 Purchasing of insurance bytype of holder
The figure of policy holder is a typical, key element in the
insurance sector, given that the Insurance Contract Act of
1980 sets forth that if the insurance policy holder and insured
party are different individuals, the obligations and duties
stemming from the contract shall be the responsibility of the
policy holder (Section 7) unless these obligations and duties,
due to their nature, must be fulfilled by the insured party.
Nevertheless, the rights stemming from the contract shall
belong to the insured party or, as the case may be, to the
beneficiary this party has designated.
Since the beginning of the Spanish Agricultural Insurance
System, the figure of policy holder has had special relevance,
which is derived from the role reserved by the legislator in
Act 87/78 for all those organisations that already exist in the
agricultural sector (agricultural chambers, cooperatives, trade
unions, etc.) and which have been playing a central role
within that sector, as the Act itself points out in Section 2.
With a view to fulfilling this objective of promoting the
agricultural association network through “…greater
participation of the farmers by means of their own
professional and trade associations and organisations…”
(Section 2.5), the Administration has given priority, since the
System first began operating, to collective purchasing over
individual purchasing. It has done this by assigning higher
subsidies to collective contracts than individual ones.
("Collective" meaning those that are carried out through the
cooperatives, agricultural organisations or any other type of
civil association that brings together a group of agricultural
or livestock farmers).
As a result of this governmental policy, today collective
purchasing represents almost 100% of the total purchasing
of agricultural insurance subsidised by the Administrations.
Due to the Administration's interest in promoting this manner
of obtaining insurance, the Ministry for Agriculture, Fisheries
and Food issued in 1998 the Ministerial Order of 23 October
(Official State Gazette (BOE) of 28 October) that “creates the
Policy Holder Register for the collective purchasing of
combined agricultural insurances”. With the publication of
5.2.1 The figure of the agriculturalinsurance policy holder
81
this Order, since the 1999 Plan the collective groups in
question must be registered as policy holders in the
abovementioned Policy Holder Register in order to be eligible
to receive the subsidy by “collective” purchasing. Thus, and
as a basic requirement, the Statutes of the association,
organisation, group, etc. must stipulate that this body has
the power to purchase insurance on behalf of its members.
The evolution of the figure of policy holder has logically
followed Spain's social and economic evolution over the last
thirty years. Thus, the predominant role of policy holder
during the first decade was reserved for the Cooperatives,
rural banks and Agricultural Chambers.
If the first two have continued affirming and strengthening
their roles, the gradual loss of importance of the Agricultural
Chambers as insurance policy holders is the result of their
reduced functions of representation, presenting claims and
defence of the professional and socioeconomic interests of
the agricultural and livestock farmers. This role has been
assumed with unquestionable force by the freely-created
professional organisations.
The activity of the Agricultural Professional Organisations has
a two-fold purpose: on the one hand, as policy holders in
the name and on behalf of the agricultural and livestock
farmers of the collective policies, thus representing the rights
and obligations set forth in the Insurance Contract Act; and
on the other, as full members in the committees and work
groups in which the different types and covers of the
agricultural insurances are discussed and created.
Lastly, we must mention the consulting and advising services
provided by the Associations driven and fuelled by the
insurance companies themselves under the regulations issued
by the Ministry of Agriculture during the most important
years of the System's development.
5.2.2 Purchasing insurance according tothe legal status of the collectivepolicy holder
82
YEARAGRICULTURALASSOCIATIONSOF INSURANCE
ENTITIES
AGRICULTURALORGANISATIONSAND FARMERS
UNIONS
OTHERAGRICULTURALASSOCIATIONS
COOPERATIVES RURALBANKS
AGRICULTURALPROCCESSINGCOMPANIES(SAT) AND
OTHER LEGALENTITIES
LOCAL ANDPROVINCIAL
AGRICULTURALCHAMBERS
1980 169 318 75 431 412 37 431
1981 21,766 41,113 9,674 55,623 53,205 4,837 55,622
1982 18,999 35,887 8,444 48,553 46,442 4,222 48,555
1983 22,675 42,831 10,078 57,948 55,429 5,039 57,948
1984 31,608 59,704 14,048 80,776 77,264 7,024 80,775
1985 28,555 53,937 12,691 72,973 69,801 6,346 72,972
1986 22,401 42,314 9,956 57,248 54,759 4,978 57,249
1987 18,761 35,438 8,338 47,946 45,861 4,169 47,947
1988 19,857 37,509 8,826 50,747 48,541 4,413 50,746
1989 17,982 56,484 7,578 52,731 51,334 5,920 55,127
1990 27,676 53,940 9,954 62,204 58,683 5,981 49,032
1991 36,461 61,549 10,452 74,148 72,896 4,985 46,752
1992 37,131 56,667 10,782 74,961 77,517 4,316 36,446
1993 40,411 59,054 11,988 72,135 98,019 3,259 26,052
1994 83,214 56,331 15,201 74,461 59,086 4,483 15,386
1995 84,338 58,166 11,139 73,199 56,505 4,229 10,150
1996 109,990 66,986 13,369 77,524 71,974 4,136 3,681
1997 107,116 59,174 11,409 76,812 64,968 5,499 2
1998 117,969 57,695 12,138 69,244 70,858 4,336
1999 119,590 56,218 15,442 71,510 65,647 5,333
2000 137,611 58,070 17,564 75,371 71,772 5,805
2001 118,479 50,539 16,377 72,795 60,773 5,753
2002 191,323 58,389 28,174 77,831 75,451 7,617
2003 202,432 59,398 25,825 78,738 77,851 7,773
2004 214,428 60,880 26,878 80,572 82,353 8,295
2005 238,362 64,082 31,199 83,616 91,776 7,810
2006 226,081 57,920 28,837 72,597 85,988 6,618
2007 248,128 64,282 34,451 68,650 94,579 6,287
2008 249,437 77,549 33,920 44,947 96,178 4,5022009 241,339 75,961 29,611 39,701 91,530 4,790 0
EVOLUTION OF THE NUMBER OF POLICIES BY TYPE OF COLLECTIVE POLICY HOLDER
83
Value in millons of euros.
1980 0.10 0.20 0.05 0.26 0.25 0.02 0.26
1981 1.50 2.83 0.67 3.83 3.66 0.33 3.83
1982 1.66 3.14 0.74 4.24 4.06 0.37 4.24
1983 2.57 4.86 1.14 6.57 6.29 0.57 6.57
1984 4.90 9.25 2.18 12.52 11.97 1.09 12.52
1985 4.79 9.05 2.13 12.24 11.71 1.06 12.24
1986 4.32 8.15 1.92 11.03 10.55 0.96 11.03
1987 5.03 9.50 2.23 12.85 12.29 1.12 12.85
1988 6.38 12.05 2.84 16.30 15.59 1.42 16.30
1989 6.39 20.06 2.69 18.73 18.24 2.10 19.58
1990 10.66 20.77 3.83 23.96 22.60 2.30 18.88
1991 14.79 24.97 4.24 30.08 29.58 2.02 18.97
1992 18.44 28.14 5.35 37.22 38.49 2.14 18.10
1993 18.29 26.72 5.42 32.64 44.35 1.47 11.79
1994 43.51 29.45 7.95 38.93 30.89 2.34 8.05
1995 44.51 30.69 5.88 38.63 29.82 2.23 5.36
1996 65.33 39.79 7.94 46.05 42.75 2.46 2.19
1997 67.04 37.04 7.14 48.08 40.66 3.44
1998 81.13 39.68 8.35 47.62 48.73 2.98
1999 84.51 39.73 10.91 50.53 46.39 3.77
2000 105.57 44.55 13.47 57.82 55.06 4.45
2001 99.76 42.55 13.79 61.29 51.17 4.84
2002 155.81 47.55 22.94 63.38 61.45 6.20
2003 182.79 53.64 23.32 71.10 70.30 7.02
2004 198.67 56.41 24.90 74.65 76.30 7.69
2005 230.42 61.95 30.16 80.83 88.72 7.55
2006 281.13 72.02 35.86 90.27 106.92 8.23
2007 287.46 74.47 39.91 79.53 109.57 7.28
2008 334.06 103.86 45.43 60.20 128.81 6.03
2009 325.12 102.14 39.82 53.38 123.07 6.44
YEAR
AGRICULTURALASSOCIATIONSOF INSURANCE
ENTITIES
AGRICULTURALORGANISATIONSAND FARMERS
UNIONS
OTHERAGRICULTURALASSOCIATIONS
COOPERATIVES RURALBANKS
AGRICULTURALPROCCESSINGCOMPANIES(SAT) AND
OTHER LEGALENTITIES
LOCAL ANDPROVINCIAL
AGRICULTURALCHAMBERS
EVOLUTION OF ACCRUED NET PREMIUM VALUE BY TYPE OF COLLECTIVE POLICY HOLDER
5.3 Distribution ofagricultural insurance
84
As already mentioned in the introduction to this Chapter,
marketing this type of insurance requires significant
specialisation, given the nature of the goods to protect and
the multiple cover options that the System has been
developing, even for one single type of crop.
All this means that it is necessary to have an extensive
network of brokers, due to the large number of potential
insured parties, their geographic dispersion, often in places
that are difficult to access, and the inevitable specialised
documentation to be used, as well as adequate business
organisation that makes it possible to provide the service
throughout the entire country.
The extensive presence of co-insurance companies in the
pool to date has made it possible to meet the aforementioned
requirements, as seen in the graphs below.
85
Distribution of brokers by Autonomous Community. Purchasing of Insurance. Year 2009
AUTONOMOUS COMMUNITY NET COST (€) NO. OF POLICIES NO. OF BROKERS
Andalucía 37,870,317 19,367 446
Aragón 31,971,506 9,835 214
Asturias 1,157,399 1,039 60
Baleares 23,447 11 8
Canarias 613,483 867 12
Cantabria 546,823 172 31
Castilla y León 13,173,729 6,405 217
Castilla-La Mancha 12,891,877 5,494 224
Cataluña 32,747,188 15,521 568
C. Valenciana 23,159,139 17,522 199
Extremadura 9,345,868 2,466 97
Galicia 6,269,701 6,772 240
La Rioja 2,036,441 274 36
Madrid 1,805,589 807 65
Murcia 3,156,532 676 58
Navarra 12,092,397 6,873 127
País Vasco 764,083 644 32
TOTAL 189,625,520 94,745 2,634
Distribution of agents by Autonomous Community. Purchasing of Insurance. Year 2009
AUTONOMOUS COMMUNITY NET COST (€) NO. OF POLICIES NO. OF BROKERS
Andalucía 60,429,873 52,742 3,829
Aragón 50,266,725 30,281 922
Asturias 9,679,171 21,739 722
Baleares 2,660,286 1,735 52
Canarias 13,060,810 3,521 108
Cantabria 4,114,316 1,709 92
Castilla y León 75,376,179 71,432 2,049
Castilla-La Mancha 57,660,528 41,908 1,964
Cataluña 39,613,589 19,422 1,258
C. Valenciana 60,475,652 37,368 1,146
Extremadura 47,594,392 25,296 1,158
Galicia 23,685,468 58,191 1,819
La Rioja 13,018,449 3,329 236
Madrid 2,014,320 2,203 294
Murcia 40,611,026 8,767 413
Navarra 14,747,557 6,641 399
País Vasco 3,945,339 1,849 110
TOTAL 518,953,680 388,133 16,571
6Assessment of damagesand loss
88
If there is any time during which the usefulness of insurance
as an instrument for covering damage (normally financial)
caused by an unforeseen event is most evident, it would be
during the damage assessment. This is when the insured
party, who has paid a price in advance to the insurance
company in order to obtain a certain amount of cover,
“contacts” the person who has sold them this protection.
This contact is also often carried out by means of an expert
appraiser.
In the case of agricultural insurance, that figure has been
evolving not only technically, but especially structurally and
professionally. The involvement of the expert appraiser in the
System as a whole has been increasing together with the
sophistication of daily management resulting from its own
development.
Thus, this role has progressed from a government expert,
who belongs to various government agencies inherited from
the original System in which agricultural insurance was
individually managed by the insurance companies, to an
independent professional whose relationship with
AGROSEGURO, the System's manager, is defined by an
annual service agreement.
Likewise, the structure of this service has evolved just as
AGROSEGURO has evolved, adapting its geographic
structure. In 1985 there were 11 branches, the first large
step in the activity's management. In 1986 there were 13,
and in 2000, without going up in number, they were
redistributed to form the system that is still in place today.
The Regional Directors coordinate the work of these
professionals in each geographic area. The experts can be
called to areas different from the one in which they usually
work when circumstances so require. That coverage is what
makes it possible to provide quick service to the insured
parties precisely where it is needed, based on the gravity of
the situation caused by the loss.
Over the years, the number of professionals that participate
in the expert network has risen from 87 in 1980 to 467 in
the present day.
MAP OF REGIONAL MANAGEMENT AUTHORITIES
89
6.1 Evolution of the expertnetwork
As mentioned at the beginning of this chapter, during the
System's first years, the expert network was basically
comprised of experts who dedicated themselves to this work
part-time, many of which were government officials who
worked for the different administrations. Their spheres of
activity were limited to the Province and thus, each Province
had to be provided with a sufficient number of experts that
would make it possible to effectively handle the possible
losses.
As the System evolved, the experts became independent
professionals who were dedicated to their activity full-time.
As a result, they were able to easily move around, travelling
to other geographic areas where their services were required.
The aim was thus to achieve higher appraisal quality and
specialisation. Indeed, the new situation made it possible for
each expert to work more days, which resulted in more
experience and a greater ability on the part of the System to
respond to the losses, as it had more experts who were
capable of appraising any type of crop, or animal in the case
of livestock productions.
As a result of the above, and despite the increase in the
insurance lines and covered risks, the number of experts has
remained about the same in recent years, even slightly
dropping.
YEARAGRICULTURAL LIVESTOCK
TOTALEXPERTS EXPERTS
1980 87 87
1981 145 145
1982 200 24 224
1983 269 32 301
1984 408 49 457
1985 512 61 573
1986 486 58 544
1987 523 63 586
1988 533 64 597
1989 543 65 608
1990 530 64 594
1991 567 68 635
1992 475 57 532
1993 496 60 556
1994 515 87 602
1995 467 91 558
1996 432 110 542
1997 422 123 545
1998 422 124 546
1999 415 118 533
2000 381 143 524
2001 383 152 535
2002 370 133 503
2003 370 136 506
2004 356 133 489
2005 376 126 502
2006 344 121 465
2007 317 118 435
2008 339 123 462
2009 345 122 467
90
Evolución del número de profesionales que forman la red pericial.
0
100
200
300
400
500
600
1980
1981
1982
1983
1984
1985
1986
1988
1989
1990
1987
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
700
EVOLUTION OF THE EXPERT NETWORK19
80
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
600
500
400
300
200
100
0
EVOLUTION OF THE EXPERT NETWORK BY SECTOR
Agricultural experts Livestock experts
91
The assessment of damage caused to agricultural production
by weather-related events or to livestock production by
diseases, including epidemic diseases, acquires special
significance for agricultural insurances, as it consists of
assessing damage caused to beings which, except in cases
of instant death, can continue evolving.
It is not just a matter of knowledge, which experts
(agronomists or veterinarians) who normally fulfil this role
logically possess, but rather guaranteeing, especially in a
System in which the public administrations play such a large
role, that the assessment is performed in accordance with
rules that are pre-established and known by the insured
party, thus ensuring the legal certainty of all those involved
(insured party, insurance company and appraisal expert).
This very important moment in the life of the insurance policy
is also covered in the Agricultural Insurance Regulation of
1979, Sections 26 to 29. It is here, amongst other legal
provisions (Sec. 28), where the concept of “contradictory
assessment” is covered, as is the “third-party expert”, the
individual in charge of settling any possible discrepancies
that arise between the experts representing the two parties
in conflict (insured party and insurance company).
However, Section 26 already provided for the existence of
“Assessment Rules”, jointly drawn up by the Ministry of the
Treasury (Supervisory Authority for Insurance and Pension
Funds), Ministry of Agriculture (ENESA) and the agricultural
organisations and insurance Companies (AGROSEGURO). In
other words, the public-private partnership appears again,
influencing the System's operation.
These "Assessment Rules” are included in the insurance
policy since they cover aspects as important as the method
for determining the damage to be compensated. They also
set forth the manner in which the appraisal expert must carry
out the appraisal process (for example, the way samples must
be collected). Thus, the insured party, who can also access
this information since it is published in the Official State
Gazette (Boletín Oficial del Estado), knows beforehand the
rules that must be followed in order to obtain a correct
assessment of the losses that have occurred.
Over these thirty years, two General Rules have been drawn
up, which are related to the agricultural and livestock
productions, and 33 Specific Rules have been created for
certain crops. The process for creating five more was begun
in 2008.
6.2 Appraisal
YEAR OFPUBLICATION
NAME GENERAL ASSESSMENTRULES
AGRICULTURAL PRODUCTIONS
LIVESTOCK PRODUCTIONS
YEAR OFLAST
MODIFICATION
20031986
2005
92
YEAR OFPUBLICATION
NAME SPECIFICASSESSMENT RULES
YEAR OFLAST
MODIFICATION
1987 CITRUS FRUITS 2003
1988 ONION 2001
1988 SPRING CEREAL 1989
1988 CHERRY
1988 STRAWBERRY AND
CHILEAN STRAWBERRY
1988 GREEN BEAN
1988 MELON AND WATERMELON 2007
1989 OLIVE FOR OIL
1989 TABLE OLIVE
1989 WINTER CEREAL
1989 CAULIFLOWER
1989 PULSES
1989 HOPS
1989 TABLE GRAPE
1989 WINE GRAPE
1989 HAZELNUT
1989 TOMATO, PEPPER AND 2007
AUBERGINE
1990 COTTON 1999
1990 TOBACCO
1992 LIMA BEAN
1992 GREEN PEA
1999 GARLIC
1999 SUNFLOWER
2000 BANANA
2001 COMPREHENSIVE CEREALS
2001 OLIVE GROVE YIELDS
2005 FRUIT TREES
2007 LETTUCE
2009 BLACKTHORN
2009 QUINCE
2009 POTATO
2009 ARTICHOKE
2009 RICE
Although data on the conflicts that have arisen from expert
assessment activity has not been collected in a systematic
manner throughout the entire period of this work, a gradual
improvement has been noted in this area. This signifies
greater knowledge on the part of both the insured party
(regarding the terms and conditions of their insurance policies
and the operation of the entire process) and the expert
appraiser. In short, the process has been made more
professional, resulting in greater security for both parties.
In any case, data on this matter has been collected
systematically over the last ten years. From this information,
if we take into account the average values, we can see that
almost 76,500 cases of agricultural assessment have been
carried out, of which an average of 2,077 cases involve some
form of “disagreement” (2.72%).
Within this category of “disagreements”, the percentage of
“contradictory” cases (i.e., cases in which a second expert is
brought in by the insured party) is an average of 1.25% (956
cases) of all the agricultural cases and of these, 87.21% are
resolved satisfactorily during this phase.
The cases in which a “third party” has been involved, during
this most recent decade, represent an average of 0.03% of
all the agricultural cases.
The main reason for disagreement is related to the damage
estimate (41.92% of all recorded reasons for disagreement).
In second place with 11.10% are the disagreements related
to the control samples that must mandatorily be left by the
farmer when the harvesting is carried out prior to the
appraisal. Lastly, disagreements related to “expected real
production” come in third with 8.75%.
In livestock productions, there is a much lower conflict rate,
given that almost 87% of the livestock cases are related to
the Collection & Disposal (C&D) lines. Breaking this area
down further, there has been an average of 111,500 cases
in the last five years, in other words, almost 12% of all the
livestock cases. Of these, 88.93% are related to breeding
and rebreeding cattle insurance, and of these only 0.21%
93
(264 cases) involved some form of “disagreement”.
Seventeen went through the “contradictory” process, most
of which were eventually “resolved”. No “third party” cases
have been recorded to date.
The more common disagreements stem from discrepancies
regarding the risk that caused the loss and, less frequently,
from the depreciation of the animals in relation to market
value due to uncovered risks.
YEAR AGRICULTURAL LIVESTOCK AQUACULTURE C & D TOTAL
1980 426 426
1981 20,682 20,682
1982 43,319 65 43,384
1983 83,638 85 83,723
1984 121,500 996 122,496
1985 123,500 703 124,203
1986 117,588 345 117,933
1987 94,090 631 94,721
1988 75,968 769 76,737
1989 96,178 728 96,906
1990 121,227 1,529 122,756
1991 118,630 3,825 122,455
1992 144,207 7,807 152,014
1993 104,972 12,405 117,377
1994 127,341 18,633 145,974
1995 138,203 25,967 164,170
1996 67,987 35,441 103,428
1997 132,845 37,858 170,703
1998 90,019 46,282 136,301
1999 130,203 56,803 1 187,007
2000 72,369 72,141 1 144,511
2001 105,294 92,304 2 1,073 198,673
2002 100,390 119,985 7 235,427 455,809
2003 63,758 123,517 5 390,966 578,246
2004 82,257 119,824 8 553,778 755,867
2005 112,493 127,212 2 684,216 923,923
2006 88,925 120,503 4 816,302 1,025,734
2007 85,537 122,031 4 903,024 1,110,596
2008 97,450 121,426 5 927,878 1,146,759
2009 89,605 119,233 2 899,000 1,107,840
TOTALS 2,850,601 1,389,048 41 5,411,664 9,651,354
(1) Claims: indemnities plus appraisal costs plus technical provision for these items
6.3 Claims(1)
The following table details the evolution of the numbers of
loss claims.
94
The year 2001 saw the start of the lines related to the
Collection and Disposal of dead animals on the farm (C&D).
During the first years, these lines included increasingly more
animal species in their covers, while at the same time the
area of application was extended to more Autonomous
Communities. This situation, together with the fact that the
request for Collection was recorded as a loss, led to an
exponential growth in the amount of loss during the first
years of the C&D insurances.
Nevertheless, over the last four years, the implementation of
these lines has stabilised, which in turn has been reflected in
the number of claims that have taken place due to the special
characteristics of this type of insurance.
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1980
1981
1982
1983
1984
1985
1986
1988
1989
1990
1987
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
EVOLUTION OF THE TOTAL NUMBER OF CLAIMS
2009
EVOLUTION OF THE NUMBER OF CLAIMS BY SECTOR
1,000,000
900,000
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
C & DAGRICULTURE LIVESTOCK AQUACULTURE
95
YEAR AGRICULTURE LIVESTOCK AQUACULTURE C & D TOTAL
1980 0.23 0.23
1981 9.22 9.22
1982 20.01 0.03 20.04
1983 49.12 0.05 49.17
1984 78.13 0.65 78.78
1985 86.71 0.50 87.21
1986 100.15 0.29 100.45
1987 72.61 0.19 72.81
1988 67.74 0.25 67.99
1989 115.58 0.33 115.90
1990 134.65 0.96 135.62
1991 159.72 1.44 161.16
1992 258.73 3.34 262.07
1993 132.00 5.40 137.40
1994 149.96 7.87 157.83
1995 219.04 11.55 230.59
1996 70.14 16.16 86.31
1997 169.89 19.35 189.24
1998 127.84 23.80 151.64
1999 284.71 28.02 0.25 312.99
2000 122.07 41.33 0.01 163.40
2001 242.53 47.44 3.82 0.44 294.23
2002 249.34 54.93 0.98 40.02 345.27
2003 160.46 50.80 2.38 58.03 271.67
2004 259.31 44.03 5.30 70.26 378.90
2005 395.31 110.02 0.03 89.56 594.92
2006 255.40 45.26 0.10 117.70 418.47
2007 277.43 47.75 0.01 135.41 460.61
2008 330.82 52.18 3.44 138.52 524.97
2009 349.34 70.60 4.00 133.03 556.97
TOTALS 4,948.21 684.53 20.32 782.98 6,436.04
Value in millons of euros.
is related to the insurance that covers damages due to a lack
of grazing lands. Major droughts were recorded during both
years. As a result, in 2005, almost 60 of the 110 million
euros paid for livestock loss corresponded with damages due
to a lack of grazing lands. In 2009, approximately 13 million
were due to this type of damage.
Lastly, with regard to aquaculture, the peaks in loss rate tend
to be associated with periodic sea storms.
Due to the special characteristics of livestock insurances, the
evolution of the animal loss rate is normally based on how
the purchasing of insurance evolves. This is what happens,
for example, with the loss rate of the C&D insurances, in
which we can see high similarity and linearity with regard to
the evolution of the policies that are contracted.kkkkkkk
Even so, there are some exceptions, since there are years in
which the loss rate differs with the pattern of how much
insurance is purchased. This was the case in 2005 and 2009
with regard to livestock. The reason for this increase in losses
EVOLUTION OF LOSS RATE
96
0
100
200
300
400
500
600
1980
1981
1982
1983
1984
1985
1986
1988
1989
1990
1987
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
EVOLUTION OF LOSS RATE
2009
Value in millons of euros.
As regards the total cost of loss during these 30 years, 76%
of the value corresponds to agricultural losses, 10% are
attributed to livestock loss and 12% to the C&D lines.llllllllll
The agricultural lines show the danger and variability of the
covered risks, which are evident through the very low loss
rate of 1996 and the somewhat “normal” rates of 2004 and
2006, in comparison with the very high loss rates recorded
in 1992, 1995, 1999 and especially in 2005, with the System
already well-balanced.
The year 1992 was characterised by a major drought that
had begun in 1991 and peaked in that year, with a greater
impact on the herbaceous crop insurances. The year 1999 is
also of special note due to a major drought, in addition to
the losses caused by hail in the citrus fruit, fruit tree and
herbaceous crop productions. Lastly, 2005 saw severe frosts
at the beginning of the year, a severe mid-year drought that
caused heavy damage to the herbaceous crops, and a tropical
cyclone at the tail end of the year that hit banana production
in the Canary Islands.
Value in millons of euros.
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
450
400
350
300
250
200
150
100
50
0
EVOLUTION OF LOSS RATE BY SECTOR
C & DAGRICULTURE LIVESTOCK AQUACULTURA
97
RAIN - PERSISTENTPIXAT2.30%
WIND 5.16%
DROUGHT - SCORCHINGNON EMERGENCE
16.90%
FROST - EARLY FROST21.82%
FIRE 0.96%
HAIL - EARLY HAIL44.76%
POOR SETTINGPOOR FLOWERING
5.90%
OTHER1.78%
FLOOD0.42%
DISTRIBUTION OF THE COST OF AGRICULTURAL LOSS BY RISK 1980-2009 PERIOD
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
HAILEARLY HAIL
35.00%
40.00%
45.00%
50.00%
FIRE FROSTEARLY FROST
DROUGHTSCORCHING NON
EMERGENCE
WIND RAINPERSISTENTRAIN PIXAT
FLOOD OTHER POOR SETTINGPOOR FLOWERING
DISTRIBUTION OF THE COST OF THE CLAIMS AND NUMBER OF AGRICULTURAL LOSSES PER RISK.
1980-2009 PERIOD
Loss rate No. of losses
DROUGHT - SCORCHINGNON EMERGENCE
14.65%
WIND8.39%
RAIN - PERSISTENTPIXAT4.38%
FLOOD0.90%
POOR SETTINGPOOR FLOWERING
1.08%OTHER2.36%
FROST - EARLY FROST25.63%
FIRE1.00%
HAIL - EARLY HAIL41.61%
DISTRIBUTION OF THE NUMBER OF AGRICULTURAL CLAIMS BY RISK 1980-2009 PERIOD
98
Based on the data, it is clear that almost 82% of the declared
claims correspond to the three risks of hail, frost and drought,
which represent 83.5% of the losses paid throughout the
entire historical series.
Hail risk represents, without a doubt, the greatest percentage
of claims and indemnities. Various factors contribute to this
situation, like the fact that this risk is present in all the series
and all the covers of the marketed lines. Moreover, the sum
insured is 100% with a damage excess of 10%, which
determines its level of loss, and of course it is a risk inherent
to the Peninsula's weather.
From this point-of-view, although both frost and drought are
risks that have been covered throughout almost all the
historical series, these covers have not been, nor are they
now, included in all the insurance lines. Thus they are related
to a lower number of claims in comparison with hail.
With the rest of the risks, which individually do not signify a
large amount in comparison with the total, we must take
into account (in addition to the same previously-mentioned
considerations related to their inclusion in certain insurance
lines) the applied excesses, most of which are around 30%.
We should also point out their importance with regard to the
virulence of these risks in certain geographic areas and
affected crops.
The financial impact or high cost of the crops in relation to
the number of claims and loss rate is particularly noteworthy.
In this regard, we can see the performance of poor setting
with significant differences between both magnitudes, in
addition to the fact that it was only implemented in the last
decade.
99
6.4 The biggest losses in thesystem’s history
Throughout the entire insurance organisation, regardless
of whether they are individual institutions or, as in the case
of the Spanish Agricultural Insurance System, a pool of
insurance companies, important events have occurred
throughout their particular history which mark the activity's
development.
Therefore, we present the data related to what could be
considered the biggest losses in the System's history in order
to illustrate this thirty-year period. They are considered big
losses due to the area of the damage, the assets affected
and the volume of indemnities paid, as well as how this
volume compares with the total paid during that specific
year.
6.4.1 Hail
For the purposes of its cover by the Agricultural Insurance
System, hail is defined as an atmospheric precipitation of
frozen water in a solid and amorphous form that, due to its
impact, causes the insured product to suffer a loss as a result
of traumatic damage.
The analysis has focused on the plant productions, since
both livestock (due to the nature of the insured assets and
covers) and aquaculture (due to its recent incorporation into
the System) have not seen losses of a noteworthy
magnitude.
This should make it possible, once again, to reflect on the
danger of this type of insurance activity and the suitability
of the co-insurance formula for covering these risks, which
can often have catastrophic financial consequences for
agriculture professionals.
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6.4.1.1 Map of the distribution of the risk
6.4.1.2 The biggest hail losses
1988.- Vineyards
• Date: 9 June.
• Area of damage:
Hectares: 154,536
Provinces: Ciudad Real, Toledo, Albacete and Cuenca.
• (1) Value of damaged assets in relation to value of insured asset: ................................................................... 7.00%
• (2) Indemnities in relation to the total net premium: ................................................................................... 118.00%
• Resulting loss rate in relation to the type of insured crop: ............................................................................. 99.69%
• (3) Resulting loss rate in relation to the total loss rate for the year: .................................................................. 8.00%
Bands
Very lowLowModerate-lowModerateModerate-mediumMediumMedium-highHighVery-high
HAIL RISKRegional Data
Hereinafter:
(1) This rate always refers to the insured assets of the crop mentioned.
(2) This rate always refers to the total amount of the accrued net premium
in relation to the crop mentioned.
(3) Loss rate: indemnities paid plus appraisal costs. The “total loss rate” is
related to all the insurance lines that exist at that time.kkkkkkk
101
2007.- Vineyards
• Date: 23 May.
• Area of damage:
Hectares: 34,574
Provinces: Ciudad Real, Toledo, Cuenca and Albacete.
• Value of damaged assets in relation to value of insured asset: ...................................................................... 12.20%
• Indemnities in relation to net premium: ...................................................................................................... 279.10%
• Resulting loss rate in relation to the type of insured crop: ............................................................................. 29.67%
• Resulting loss rate in relation to the total loss rate for the year: ...................................................................... 5.20%
NOTE.-
Very intense hail created by a rare meteorological
phenomenon during a very sensitive state for the vineyard,
causing extensive damage. Based on the magnitude of the
loss, the average damage is estimated at greater than 65%.
2009.- Fruit
• Date: 1 August.
• Area of damage:
Hectares: 12,394
Provinces: Lleida and Huesca.
• Value of damaged assets in relation to value of insured asset: ...................................................................... 63.00%
• Indemnities in relation to net premium: ...................................................................................................... 211.80%
• Resulting loss rate in relation to the type of insured crop: ............................................................................. 43.78%
• Resulting loss rate in relation to the total loss rate for the year: .................................................................... 49.00%
NOTE.-
A total of 43.78% of the losses related to this type of
affected crop occurred in only two provinces, in addition to
the fact that the loss occurred at the beginning of the
harvesting, with most of the fruit already ripe and ready for
immediate sale.
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6.4.2.1 Map of distribution of frost risk affecting wine grapes
6.4.2 Frost
For the purposes of its cover by the Agricultural Insurance
System, frost is understood as a temperature equal to or
less than the minimal critical temperature in each of the
phases of the crop's vegetative development which, due to
ice formation on the tissue, causes a loss in production as
a result of the irreversible lesions suffered by the different
parts of the plant.
Given the complexity of creating a single frost risk map
for the different plant species and varieties in Spain, we
have opted to provide just the map related to wine grapes,
a crop which, due to its characteristics and distribution,
could be considered generally representative of frost risk.
Bands
Very lowLowModerate-lowModerateMediumMedium-highHighVery high
FROST RISKRegional data
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6.4.2.2 The biggest frost losses
1986.- Fruit
• Date: 14 April.
• Area of damage:
Hectares: 10,100
Provinces: Zaragoza, Navarra, Lleida, Murcia, Huesca, Cáceres and Badajoz.
• Value of damaged assets in relation to value of insured asset: ...................................................................... 48.90%
• Indemnities in relation to net premium: ...................................................................................................... 508.70%
• Resulting loss rate in relation to the type of insured crop: ............................................................................. 88.39%
• Resulting loss rate in relation to the total loss rate for the year: .................................................................... 11.20%
1991.- Vineyards
• Date: 25 April and 5 May.
• Area of damage:
Hectares: 250,089
Provinces: Ciudad Real, Toledo and Albacete.
• Value of damaged assets in relation to value of insured asset: ...................................................................... 22.00%
• Indemnities in relation to net premium: ...................................................................................................... 434.00%
• Resulting loss rate in relation to the type of insured crop: ............................................................................. 93.09%
• Resulting loss rate in relation to the total loss rate for the year: .................................................................... 23.70%
2001.- Olive groves
• Date: 20 and 27 December.
• Area of damage:
Hectares: 15,451
Provinces: Tarragona and Lleida.
• Value of damaged assets in relation to value of insured asset: ...................................................................... 30.29%
• Indemnities in relation to net premium: ...................................................................................................... 509.00%
• Resulting loss rate in relation to the type of insured crop: ............................................................................. 99.78%
• Resulting loss rate in relation to the total loss rate for the year: ...................................................................... 3.00%
104
2004.- Fruit
• Date: 3 March.
• Area of damage:
Hectares: 11,797
Provinces: Murcia, Alicante and Valencia.
• Value of damaged assets in relation to value of insured asset: ...................................................................... 45.00%
• Indemnities in relation to net premium: ...................................................................................................... 834.00%
• Resulting loss rate in relation to the type of insured crop: ............................................................................. 84.45%
• Resulting loss rate in relation to the total loss rate for the year: ...................................................................... 5.00%
2005.- Olive groves
• Date: 27 and 28 January and 4 February 2005.
• Area of damage:
Hectares: 9,525
Provinces: Cádiz, Córdoba, Granada, Jaén, Málaga and Sevilla.
• Value of damaged assets in relation to value of insured asset: ........................................................................ 4.00%
• Indemnities in relation to net premium: ...................................................................................................... 182.00%
• Resulting loss rate in relation to the type of insured crop: ............................................................................. 96.13%
• Resulting loss rate in relation to the total loss rate for the year: ...................................................................... 4.00%
NOTE.-
The magnitude of the frost was so extensive that it not only
affected the production of the current year, but also that of
the following year, as it caused irreversible damage to the
trees. Frosts with these characteristics have only occurred
three times over the last 50 years.
2005.- Citrus fruits
• Date: 27-28 January and 4 February.
• Area of damage:
Hectares: 12,867
Provinces: Alicante, Valencia and Castellón.
• Value of damaged assets in relation to value of insured asset: ...................................................................... 31.00%
• Indemnities in relation to net premium:....................................................................................................... 554.00%
• Resulting loss rate in relation to the type of insured crop: ............................................................................. 58.79%
• Resulting loss rate in relation to the total loss rate for the year: ...................................................................... 7.00%
2005.- Fruit tress
• Date: 27-28 January and 4 February.
• Area of damage:
Hectares: 7,644
Provinces: Valencia, Alicante, Murcia and Almería.
• Value of damaged assets in relation to value of insured asset: ...................................................................... 26.00%
• Indemnities in relation to net premium: ...................................................................................................... 431.00%
• Resulting loss rate in relation to the type of insured crop: ............................................................................. 64.04%
• Resulting loss rate in relation to the total loss rate for the year: ...................................................................... 6.00%
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6.4.3 Drought
For the purposes of its cover by the Agricultural Insurance
System, a drought affecting dry farming can be defined as
the lack of dampness in the ground that adversely affects
the crop's production and/or the growth of natural
vegetation. A drought affecting irrigated farming is the lack
of water to supply the irrigation systems due to a shortage
6.4.3.1 Map of distribution of drought risk affecting dry farming
This map takes into account the yields for winter cereals.
in surface and/or groundwater, which is required for
agricultural use.
In this section, we only refer to drought affecting dry
farming.
Bands
Unfarmed/croplessLowModerateMediumHigh
DROUGHT RISKREGIONAL DATA
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Drought is considered an endemic risk of the Iberian
Peninsula and is normally associated with the cereal crop.
Its cover was one of the main objectives of the new
insurance system created in 1978.
As part of the analysis of the biggest losses mentioned in
this section, it is appropriate to comment on the "damaged
hectares" - “total loss for the year” relationship. Although
one could think that greater or lesser impact depends on
the intensity of the damage produced more than the area
of damage, it is no less true that during the first years of
the System, the weight of cereal insurance was much greater
than it is today, and thus the impact of the loss on the
System was much higher in those days.
Let us take for example the case of the year 1986, where
with 384,000 damaged hectares, the impact of the loss was
51%, while in 2005, with almost 1.3 million damaged
hectares, the impact was 28%. Once again, the law of large
numbers.
1986.- Cereal
• Area of damage:
Hectares: 384,000
Provinces: Huesca, Zaragoza, Valladolid and Burgos
• Value of damaged assets in relation to value of insured asset: ....................................................................... 44.40%
• Indemnities in relation to net premium:.................................................................................................... 2,370.00%
• Resulting loss rate in relation to the type of insured crop: ............................................................................. 93.78%
• Resulting loss rate in relation to the total loss rate for the year: ..................................................................... 51.40%
6.4.3.2 The biggest drought losses
1992.- Cereal
• Area of damage:
Hectares: 1,071,577
Provinces: Cádiz, Córdoba, Granada, Huelva, Sevilla, Albacete, Ciudad Real, Cuenca, Guadalajara, Toledo,
Huesca, Teruel, Zaragoza, Ávila, Burgos, Palencia, Salamanca, Segovia, Soria, Valladolid, Zamora, Badajoz and
Madrid.
• Value of damaged assets in relation to value of insured asset: ...................................................................... 61.10%
• Indemnities in relation to net premium: ..................................................................................................... 849.30%
• Resulting loss rate in relation to the type of insured crop: ............................................................................ 96.10%
• Resulting loss rate in relation to the total loss rate for the year: ................................................................... 66.90%
108
6.4.4 Wind
For the purposes of its cover by the Agricultural Insurance
System, wind is considered to be the violent movement of
air which, due to its intensity and physical force, causes
losses in the insured product, resulting in clearly visible tears,
breaks or fallen plants or branches, in addition to the evident
damage or stress caused by this meteorological
phenomenon on the damaged plot of land.
1995.- Cereal
• Area of damage:
Hectares: 1,242,529
Provinces: Cádiz, Granada, Jaén, Cuenca, Ciudad Real, Sevilla and Córdoba.
• Value of damaged assets in relation to value of insured asset: ...................................................................... 60.00%
• Indemnities in relation to net premium:....................................................................................................... 291.50%
• Resulting loss rate in relation to the type of insured crop: ............................................................................. 96.26%
• Resulting loss rate in relation to the total loss rate for the year: ..................................................................... 43.00%
2005.- Cereal
• Area of damage:
Hectares: 1,296,550
Provinces: Albacete, Cádiz, Cuenca, Guadalajara, Sevilla, Soria Teruel and Valladolid.
• Value of damaged assets in relation to value of insured asset: ...................................................................... 64.00%
• Indemnities in relation to net premium:....................................................................................................... 306.00%
• Resulting loss rate in relation to the type of insured crop: .............................................................................. 99.34%
• Resulting loss rate in relation to the total loss rate for the year: ..................................................................... 22.00%
109
6.4.4.1 Map of distribution of wind risk
This map is based on the following parameters: maximum
gust of wind, average gust of wind and return period.
Bands
Very lowLowModerateMediumHighVery high
WIND RISKRegional Data
2005.- Tropical storm delta
• Date: 28 and 29 November.
• Area of damage:
Hectares: 6,106
Provinces: Las Palmas de Gran Canaria and Tenerife.
• Value of damaged assets in relation to value of insured asset: ...................................................................... 48.85%
• Indemnities in relation to net premium: ...................................................................................................... 274.00%
• Resulting loss rate in relation to the type of insured crop: ............................................................................. 96.00%
• Resulting loss rate in relation to the total loss rate for the year: ...................................................................... 3.10%
6.4.4.2 The biggest wind losses
7 R&D&I in agricultural insurance
The very nature of an activity as specific as agricultural
insurance, which requires detailed statistical knowledge of
the probability of climatic phenomena (such as hail, frost,
drought or flooding) as well as knowledge of the
performance of the different plant productions throughout
their development cycle, created the need for research as a
way to gain a better understanding of the meaning of the
variables and factors that come together in the final cover
offered to agricultural professionals in the form of insurance.
This task was assumed practically from the beginning of the
System by its manager, AGROSEGURO, which is a highly
specialised institution due to the type of risks to be covered
and the agricultural and livestock productions to be
protected.
Thus, it was clear from the start that the research to be
conducted in each case should be research that could be
"applied" directly to the fundamental objective: to create
covers that were adapted to the reality of the risk and of the
production to be protected and to have reliable methods to
verify the damage caused (adjustment techniques) and to
improve the knowledge that would be gathered.
The information below shows some examples of this
"applied” research, which has always depended on university
collaboration.
7.1 Identifying the insured riskusing the symptomatologythat appears on the affectedstock. Determining thedamage caused to crops bythe insured risk.
These two issues can be considered the basic pillars of
appraisal. The first case, identification using symptomatology,
is an attempt to distinguish the insured risk from others,
which coincide in time and may or may not be covered and
have a very similar “a priori” appearance.
In the second case, the idea is to determine the damage
when the lost or affected stock is not the final harvest (e.g.
with melon, the total loss of the aerial part may result in a
loss of anywhere from 0% up to 30% depending on the
plant's development phase).
As regards symptomatology, research conducted or led by
AGROSEGURO has focused on the specific symptoms caused
by spring frosts in stone and pome fruit trees.
In general, frost sensitivity increases from the start of winter
rest to full flowering. But, given the fact that the occurrence
of a meteorological frost may not be enough to determine
the frost damage to a fruit tree species, it is necessary to
look at the plant tissues and verify that they show specific
frost symptoms that are different from other causes such as
a lack of fruit set, pests, diseases, phytotoxicities, a lack of
winter cold, etc.
For the purpose of gaining a deeper understanding of the
different aspects related to the effects of frost (and in addition
to the project described in the following section),
113
AGROSEGURO has a collaboration agreement with the
University of Navarre to study the symptomatology of frost,
simulating frosts in chambers and comparing the
observations with fieldwork.
With regard to the second “pillar” of assessing damage, its
quantification, AGROSEGURO has been working on, for
example, determining indirect damage (caused by defoliation)
by simulating hail damage. There are many crops where the
incidence of risk affects plant parts that do not directly
comprise the final product; for example, all crops in which
the harvested part is underground, such as potatoes, beets,
onions, garlic, etc. There are also cases where the disaster
occurs during a crop phase prior to flowering and fruiting,
causing damage to the plant part which will have an effect
on the production (sunflowers, corn, broccoli, cauliflower,
etc).
In these situations, the risks covered by agricultural insurance,
and in general any adverse weather, directly affect the plant
by reducing its foliar surface. This is understood by the plant
as a possible risk to its survival. Thus, its first reaction is the
regeneration of foliar surface which redistributes the nutrient
flow. Depending on the growth phase, this could cause a
reduction in size, in the number of inflorescences or in the
size of the fruit.
This damage can only be measured if there is an undamaged
control plant that is under the same growing conditions. The
only way to achieve this is by simulating the damage caused
by different risks (primarily, hail and wind). This has led to
the need for collaboration from universities in order to perfect
both the simulation methods as well as the determination of
the final damage on the harvest by estimating the foliar mass
loss.
Tests of this type have been conducted since 1992. A variety
of universities (Public University of Navarre, Polytechnic
University of Madrid, School of Agricultural Engineering in
Ciudad Real, etc.) have collaborated on these tests. Thus,
there have been many joint projects as the tests have been
conducted on a very high number of crops, such as: melon,
General view of a test showing the different damage caused during a certain part of thegrowth cycle.
Defoliación alta Defoliación media Defoliación leve Testigo
114
sunflower, potato, beets, green bean, beans, cauliflower,
onion, seed potatoes, rice, garlic, etc.
The final result is shown in tables that link the defoliation
produced in the plant for a specific phase of the cycle to
In the beginning, this research project, which obtained the
EUREKA label in 1999 and has been funded with a loan from
the Centre for Industrial Technological Development (CDTI
by its Spanish initials), was carried out by AGROSEGURO in
collaboration with the National Agricultural Research Institute
(INIA) in Madrid. During the final phase since 2007, it has
7.2 Isolation andcharacterisation ofsynthesized proteins inresponse to frost in fruittree species
been carried out in collaboration with the Biological Research
Centre (CIB) in Madrid, which belongs to the Spanish High
Council for Scientific Research (CSIC).
The risk of frost is one of the risks that most systematically
affect stone fruit trees, even though a few days after the risk
occurs, the damage caused to the recently set fruit can be
macroscopically confused with damage produced by other
causes, such as, for example, a deficient fruit set.
Based on the fact that it has been scientifically proven that
there are proteins in plant tissues that are induced in response
to different types of environmental stress, including cold
weather, it was decided that the objective of this project
would be to identify changes in the peptides or proteins of
fruit species caused by frost. In this way, a kit could be
developed that, through a colorimetric reaction, would make
it possible to distinguish, in the field, the fruit organs that
are frozen from those that are not, with the greatest possible
certainty.
As a result of this research conducted over the last ten years
by Maria Virtudes Andrés, a Doctor of Biology who works
for AGROSEGURO, four peptides have been separated and
identified that are capable of being frost markers. They have
already been presented to the Spanish Patent and Trademark
Office, together with the CSIC.
crop losses. This is normally used as the basis for the table
shown in the Specific Adjustment Standards for the crop in
question.
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7.3 Fruit tree productionpotential method
Within the agricultural sector, the fruit production
subsector in our country is one of the most specialised and
most important, as it represents up to 11% of all plant
production. And within the Agricultural Insurance System,
the insurance lines for fruit productions are at the top with
regard to premium reserves and the value of the insured
production.
One of the most important aspects for fruit growers is
estimating what level of production will be obtained under
normal conditions on their farm well enough in advance.
These estimates are often done before flowering,
accompanied by the difficulty that the plants have not begun
developing and knowing that, in order to obtain a normal
production, only 3% to 20% of the flowers need to form
into fruit.
Through its different lines of fruit tree insurance, with “frost”
risk cover since 1981 and “poor setting” cover since 2002,
agricultural insurance protects against reductions in real
production obtained in comparison with production capacity.
These are risks that often occur in the first stages of fruit
development, during or prior to flowering when the fruit has
not yet appeared, making it very difficult to determine the
farm's production capacity.
This is why research and the results that are being obtained
in the field of "production potential" of different fruit species
and varieties are so important.
For the purpose of obtaining a reliable method for
determining the production capacity of a fruit farm,
AGROSEGURO has signed various collaboration agreements
with the Public University of Navarre to search for a method
that is capable of assessing this capacity by using objective
parameters that can be used in the absence of a harvest.
The short-term objective is to obtain antibodies against
specific frost proteins in peach trees (Prunus persica), which
in the future will enable the development of a frost diagnostic
test in the field.
116
This collaboration has led to the design of mathematical
models that correlate various easy-to-measure parameters
during the vegetative rest of the trees, such as:
• Species. Different models are applied depending on the
species.
• Variety. The growth capacity of the fruit is a general
characteristic.
• Tree vigour. Measured in cm2 and estimated using the
trunk section that begins some 15 cm above the graft.
This indicates the tree's capacity to offer water and
nutrients.
• Plant density. By measuring the spacing of plants, the
land surface assigned to each tree, and therefore the
competition between trees, can be determined.
• Pruning load. In other words, depending on the quantity
of productive shoots left after pruning. For stone fruit
trees, this is the quantity of shoots (fruiting shoots and
spurs) that are left on the tree and their length.
• Fruit load. In pome fruit trees, this is the quantity of
fruiting buds.
The first studies that were done were on the most important
crops: peach trees, apple trees and pear trees. They began
in 1997 and continued until 2001.
From 2001 to 2003, studies were carried out on the Japanese
plum tree and finally, in 2005 and 2006, tests with the cherry
tree were conducted.
The result of all of this research was the creation of a
methodology which uses mathematical models to correlate
the parameters listed above in accordance with the different
crops. This makes it possible to estimate, with a significant
degree of certainty, the production capacity of the tree in
question. In this way, an assessment can be made of the
damage caused by risks that occur during the first phases of
fruit development, which result in decreased production.
117
As was already mentioned in Chapter 2 of this work, one
of the milestones in the history of the Spanish system was
the introduction of cover for a lack of vegetation in grazing
lands used to feed livestock.
This cover is based on what is known as NDVI (Normalized
Difference Vegetation Index), a scientifically proven indicator
of vegetation activity and, in short, of the quantity and vigour
of the vegetation on the land.
Historic images captured from 1986 until 2000 by the NOAA
satellite with a spatial resolution of 1 x 1 km2 were first used,
always with assistance from the Remote Sensing Laboratory
of the Department of Applied Physics at the University of
Valladolid (LATUV). (In 2010, the TERRA and AQUA satellites
have been used, which have MODIS sensors that provide a
resolution of 250 x 250 metres (in other words, 6.25 Ha) and
therefore greater accuracy.)
The insurance is based on the comparison carried out by
LATUV of the aforementioned index (NDVI), which is
measured every 10 days, with the average of the same ten
measurements for the same uniform grass area. This means
that a loss is considered to exist when the result of the
measurement is lower by a certain percentage than the
average obtained for those ten measurements.
Prior to this comparison, the applied research made it possible
to draw up a map of Spain divided into 343 regions and
establish for each one of them: the NDVI evolution over one
year according to the historic average; a second curve under
the historic curve that marks a certain level of vegetation
scarcity; and finally, a third curve that marks a deeper level
of vegetation absence.
The compensation that is paid to the livestock farmer per
head of livestock declared in the insurance policy increases
as the NDVI decreases.
7.4 Satellite measurement ofthe vegetation index
The measurements are placed in groups of ten in order to
get around the fact that on certain days during a ten-day
period, the satellite cannot take images of the area due to
cloudiness. Once three ten-day periods are below the second
and third curves, the livestock farmer is paid compensation
for the entire period within the two “seasons” into which
the year is divided for insurance purposes.
Thus, thanks to this technology, it is possible to establish the
behaviour of the grazing lands all across Spain and always in
accordance with the regular climate of any given region.
118
The current vegetation index is above average. There is no drought situation.
The vegetation index is below average, but does not indicate a loss.
The vegetation index is below average and indicates a loss.
The vegetation index is below average and indicates a very serious loss.
NDVI-A > AVERAGE
A > NDVI-A > B
MEDIA > NDVI-A > A
B > NDVI-A
REGION OF CASTUERA (BADAJOZ)
IMAGE FROM THE AVHRR SENSOR ON THE NOAA SATELLITE DURING THE TEN-DAY
PERIOD 21/11/2009-30/11/2009
119
EVOLUTION CURVES FOR THE NDVI VEGETATION INDEX IN THE REGION
OF CASTUERA (BADAJOZ), 2008 PLAN
- 2008 Plan: Vegetation index throughout the cover period (December 2008 - November 2009)
- Average: Historical average from 1987-2006 of the vegetation index in that region for each ten-day period
- Stratum A: Curve below the average that establishes the first loss threshold
- Stratum B: Curve below stratum A that establishes the second loss threshold
Des Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
Summary:
Guaranteed stratum Tens
NDVI-A>AVERAGEMEDIA >NDVI-A>AA > NDVI-A > BB > NDVI-ANo coverage
B
A
12
3
80
70
60
50
40
30
20
10
1DD
2DD
3DD
1DE
2DE
3DE
1DF
2DF
3DF
1DM
2DM
3DM
1DA
1DA
3DA
1DY
2DY
3DY
1DJ
2DJ
3DJ
1DX
2DX
3DX
1DG
2DG
3DG
1DS
2DS
3DS
1DO
2DO
3DO
1DN
2DN
3DN
Veg
etat
ion
ind
ex
Tens
AVERAGE STRATUM A STRATUM B 2008 PLAN
8 Protection for insuredparties
122
Irrespective of the administrative and jurisdictional mechanisms
protecting insured parties that are established and
encouraged in our country by the various regulations that
oversee insurance entities, the figure of the Insurance
Ombudsman appeared for the first time in the Spanish
insurance sector in 1984 by decision of the MAPFRE Group
Board under the name Insurance Ombudsman Committee.
At first, it focused on the insured parties of MAPFRE
MUTUALIDAD (Automobile Insurance) and was later
extended to all of the Group's insurance branches.
It was not until 1995 (with Spanish Act 30/1995 of 8
November on the Planning and Supervision of the Private
Insurance Sector) when, in line with the already well-
established practice in other European Economic Community
states, the two lines that can be used by insured parties to
defend their interests against insurance companies were
created, always irrespective of legal recourse: the process of
filing a claim with the Insurance Supervisory Authority (Sec.
62) and the process involving the Insurance Ombudsman
(Sec. 63).
In the first case (Sec. 62), the Supervisory and Control Body
is responsible for receiving and processing, where
appropriate, complaints and claims sent by insurance policy
subscribers. In the second case (Sec. 63), the Act provides
for the possibility that insurance entities, either individually
or in groups, may “…designate independent entities or
experts of renowned prestige as the insurance Ombudsman
before whom the claims…that are presented by insurance
policy holders, insured parties, beneficiaries, injured third
parties and rightful claimants against these entities are
voluntarily submitted for a decision”. (Both cases are
respectively outlined in Sections 108 and 109 of the Act's
Regulation).
Subsequently, Spanish Act 44/2002 of 22 November on
Financial System Reform Measures set forth as one as its
objectives to provide financial services users with possible
ways to present their complaints, claims or queries to the
supervisory authorities. In Chapter 5, it established the figure
of the Commissioner, one for each supervisory body in our
financial system, the Bank of Spain, the Supervisory Authority
for Insurance and Pension Funds and the National Securities
Market Commission (CNMV).
Thus, as defined by the Act, administrative bodies belonging
to these authorities shall “absorb” the respective claims
services or administrative units, that already exist, under the
terms of Section 27 of Act 44/2002.
In order to implement the provisions of this Act, Spanish
Royal Decree 303/2004 of 20 February was enacted to
approve the Regulations on Commissioners in defence of
financial service customers. In Section 8, it sets forth that in
order for complaints or claims to be admissible before the
Commissioner, they must first be submitted and processed
by the customer service department, or where appropriate,
by the customer Ombudsman of the financial entity against
which the complaint or claim is submitted.
Lastly, Order ECO/734/2004 of 11 March, on customer service
departments and services and the customer Ombudsman of
financial entities, was approved on 11 March (Official Spanish
Gazette dated 24 March).
For the time being, this regulation concluded the
implementation of the provisions established in the 2002
Act, which set forth that the financial entities concerned
"...must have a specialised customer service or
123
department..." (Sec. 1.1) even though, they may also
"...designate a customer Ombudsman who handles and
resolves all types of claims that are submitted for a
decision…” (Sec. 1.2).
In any case, either the customer service, if only this exists, or
this service plus, where appropriate, the Customer
Ombudsman, shall have a period of two months to resolve
these matters. Once this period has passed, the claimant
may contact the corresponding Commissioner, in this case
the Supervisory Authority for Insurance and Pension Funds.
As is logical, agricultural insurance could not remain outside
this movement towards defending and protecting the
interests of insured parties through means that were more
flexible and less expensive than the traditional legal
procedures.
Nevertheless, and given that all of the activity carried out in
this sector of the national economy was conducted through
a co-insurance pool managed by AGROSEGURO, a decision
was made to provide the System with an Insurance
Ombudsman, from the very beginning and under the
provisions of Section 62 of the 1995 Act on Planning and
Supervision of the Private Insurance Sector. In line with the
already experienced model developed by the MAPFRE Group,
this figure would provide a quick, effective and free response
to the complaints and claims filed by individual agricultural
and livestock farmers, as insured parties, against the decisions
taken by AGROSEGURO on behalf of the insurance
companies grouped together in the co-insurance pool.
Therefore, in 1997, the AGROSEGURO Ombudsman
Institution was created, appointing Mr. Federico Carlos Sainz
de Robles to fill the position. He was already at that time a
figure of renowned prestige in the world of law and had
held the offices of President of the Supreme Court and
President of the General Council of the Judicial Branch.
In addition, AGROSEGURO has operated a Claims Service
since 1995.
Afterwards, and as a result of the necessary modifications
introduced into this line of action by the aforementioned Act
44/2002 of 22 November and its implementing regulations,
the entire operation of these services was adapted to the
new demands, primarily with regard to the need to resolve
a claim within a maximum period of two months. Thus, the
new Customer Service and Customer Ombudsman
Regulations were approved by the AGROSEGURO Board of
Directors, which in turn were approved by the Supervisory
Authority for Insurance and Pension Funds by means of a
Resolution dated 30 November 2005.
Thus, the Spanish Agricultural Insurance System has had a
two-fold structure since 1997 for protecting the interests of
agricultural and livestock farmers who decide to protect their
business through insurance. On the one hand, the Claims
Service which is part of the AGROSEGURO organisational
structure, and on the other hand, the Insurance Ombudsman,
which is a figure and service that is independent of the
Group.
124
8.1 Customer service
Customer Service is a service offered by the Spanish
Agricultural Insurance System for the purpose of studying
the complaints and claims that are submitted and which
derive from a combined agricultural insurance policy.
During the last 13 years, Customer Service has received
5,044 claims, representing 0.09% of all AGROSEGURO
policies for that same period, with 26.62% of them deemed
founded.
CLAIMS
RECEIVED
ACCEPTED
REJECTED
PENDING
2009
305
103
179
23
2008
279
111
168
0
2007
368
73
295
0
2006
466
76
390
0
2005
553
88
465
0
2004
446
108
338
0
2003
352
114
238
0
2002
456
116
340
0
2001
428
95
333
0
2000
272
93
179
0
1999
369
112
257
0
1998
359
127
232
0
1997
391
116
275
0
0
100
200
300
400
500
600
2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997
EVOLUTION OF CLAIM PROCESSING BY CUSTOMER SERVICE
RECEIVED ACCEPTED REJECTED
125
The types of claims can be classified into two large groups:
first, those related to the contracting process including issues
such as increased yields, procedures past the established
deadlines, discounts or contract errors, the latter accounting
for 57% of the claims.
The second group is comprised of claims related to the damage
assessment and appraisal processes and includes issues such
as disagreements with the appraisals (59% of all these types
of claims), the rejection of samples considered invalid, errors
on appraisal records, etc.
8.2 Customer ombudsman
The Customer Ombudsman is an Institution that is independent
of AGROSEGURO and has the right to resolve claims based
on legal or equity criteria. On behalf of the insurance companies
in the pool, AGROSEGURO has committed to complying with
these resolutions up to an amount of 120,000 euros.
Since it was implemented in 1997, this Service has received
914 claims with 199 deemed to be founded (21.77%).
CLAIMS
RECEIVED
FOUNDED
REJECTED
NOT PROCESSED SINCE
THE REQUEST FOR A
RESOLUTION WAS NOT FIRST
PRESENTED TO CUSTOMER
SERVICE (CS)
NOT ADMITTED FOR PROCESSING
FOR VARIOUS REASONS
PENDING RESOLUTION
2009
48
9
26
0
9
4
2008
42
1
29
7
5
0
2007
102
2
81
9
10
0
2006
97
12
85
0
0
0
2005
103
41
62
0
0
0
2004
107
26
25
49
7
0
2003
69
23
35
3
8
0
2002
95
18
68
4
5
0
2001
84
20
50
9
5
0
2000
51
20
21
9
1
0
1999
25
7
11
6
1
0
1998
45
14
14
16
1
0
1997
45
6
7
22
10
0
0
20
40
60
80
100
120
2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997
CLAIM PROCESSING BY THE CUSTOMER OMBUDSMAN SERVICE
RECEIVED FOUNDED REJECTED NOT PROCESSED
126
8.3 Satisfaction surveys
In a world that is as specialised as the management of risks
to which agricultural and livestock farmers are subject, the
primary objective of the Spanish Agricultural Insurance System
has been to provide solutions for the economic as well as
social damages caused by the natural and epizootic phenomena
that affect livestock species.
All of the data provided in the previous chapters make it
possible to conclude that the System has attained a notable
level of efficiency and stability, always working within a context
where the search for excellence in the organisation has been
present in any activity or process and with the clear objective
of ensuring maximum satisfaction for all of the System's
customers, especially the end users: the agricultural and
livestock farmers. Therefore, their perception is essential to
knowing how things are getting done, establishing objectives
for improvement and working on the aspects that are less
efficient.
With this philosophy, for the last decade of this thirty-year
period, AGROSEGURO has been conducting surveys with both
agricultural and livestock farmers in order to determine their
level of satisfaction regarding various matters related to the
basic aspects, form and management of this insurance activity.
The result of this research can be considered “reasonably
satisfactory”. However, it also indicates that there is still room
for improvement on all fronts. Without a doubt, work related
to this task continues on day after day.
127
AGRICULTURAL INSURANCEEVOLUTION OF OVERALL QUALITY BY CROP
10
9
8
7
6
5
4
3
2
1
0
200220032004200520082009
CEREAL(LINES 5,118)
5.856.526.545.726.466.66
CEREAL(LINES 6)
6.276.596.396.096.766.71
GRAPES
6.426.476.606.206.756.99
CITRUSFRUITS
7.226.877.026.917.177.26
FRUITSTREES
6.476.396.416.096.686.68
INSUREDPARTY
6.396.706.576.256.836.92
LOSS
6.526.376.636.156.676.68
TOTAL
6.456.576.596.206.766.86
10
9
8
7
6
5
4
3
2
1
0
AGRICULTURAL INSURANCEEVOLUTION OF OVERALL QUALITY BY FEATURES
200220032004200520082009
2001
SERVICEPURCHASE OFINSURANCE
8.588.458.588.248.308.198.38
POLICYCOVER
6.406.326.536.076.926.95
FINANCIALAND
CONDITIONS
6.416.366.326.036.786.82
SERVICEWHEN
HANDLING LOSS8.077.707.787.567.477.888.00
APPRAISALADJUSTMENT
SERVICE5.926.026.096.276.046.876.89
PRIORINFORMATION
7.066.957.046.906.837.167.28
INDEMNITYFOR LOSS
5.775.966.106.175.746.646.89
In general, overall quality has improved 40 hundredths of a
point, attaining the best mark of the series in 2009. This
situation also applies to the results at the crop level, as well
as to the general aspects that comprise the service provided.
It is worth noting that aspects such as the policy cover,
compensation, as well as the damage appraisal and
assessment service, which traditionally have been critical
areas in the insurance sector, are the ones that have improved
the most: nearly one percentage point between the results
obtained when these studies began and today.
0
1
2
3
4
5
6
2002 2003 2004 2008 2009
LIVESTOCK INSURANCE. OVERALL QUALITY
7
8
MILKTOTAL MEAT
Data related to Bredding and Rebreeding Insurance for Cattle.
129
Unlike the agricultural sector, this sector is characterised by
a certain stability with regard to overall quality, with a turning
point in 2004 as a result of technical adjustments. The
situation re-stabilised during the following seasons and
equals the assessments obtained in the agricultural sector.
Just as with the agricultural sector, the assessments regarding
issues related to compensation, policy cover, economic
conditions, assessment and appraisal have improved, even
though the increase is not as pronounced, ranging between
10 and 20 hundredths of a point when analysing the
complete series.
0
1
2
3
4
5
6
7
8
9
10
INDEMNITY
6.596.516.166.766.83
Data related to Bredding and Rebreeding Insurance for Cattle.
20022003200420082009
PRIORINFORMATION
8.478.548.318.358.38
7.597.447.117.367.29
SERVICE DURINGPURCHASE
OF INSURANCE
6.816.726.367.016.91
FINANCIAL TERMSAND CONDITIONS
7.577.297.097.957.76
APPRAISALSERVICE COVER
7.287.056.887.497.38
8.328.368.308.438.47
SERVICE WHENHANDLING LOSS
LIVESTOCK INSURANCE. GLOBAL TRENDS IN THE QUALITY ISSUES BY SERVICE
AND PRODUCT
130
If the reader has had the patience and curiosity to read up to the final sections of this
work, they have surely already reached their own conclusions regarding the significance,
importance and usefulness that this Agricultural Insurance System signifies for Spanish
society.
In any case, and setting aside the self-satisfaction that fosters a resistance to change,
it is only fair to acknowledge, here and now, that with the maturity reached over these
thirty years of ongoing development and innovation, the Spanish Agricultural Insurance
System has attained levels of quality and strength that make it possible to face the
challenges of the future with confidence.
MADRID, June 2010
Epilogue
131
3. INSURED PRODUCTIONS
Evolution of the number of hectares and kg of agricultural production that are insured (table) ........................ 44
Evolution of the number of hectares and kg of agricultural production that are insured (graph)........................ 45
Evolution and implementation in extensive herbaceous crops ........................................................................... 46
Evolution and implementation in fruit trees ...................................................................................................... 47
Evolution and implementation in citrus fruits .................................................................................................... 49
Evolution and implementation in wine grapes .................................................................................................. 50
Evolution and implementation in vegetables..................................................................................................... 51
Evolution and implementation in olive groves ................................................................................................... 52
Evolution of the number animals insured ......................................................................................................... 53
Evolution and implementation in cattle............................................................................................................. 54
Evolution and implementation in sheep / goats................................................................................................. 56
Evolution of insured and insurable animals under C & D .................................................................................. 57
4. SUBSIDIES FOR INSURANCE PRICES
Overall ENESA contribution to agricultural insurance ........................................................................................ 61
Evolution of ENESA's annual contribution to agricultural insurance................................................................... 62
Financial contributions made by the Autonomous Communities to agricultural
insurance during the 1988-2009 period ........................................................................................................... 63
Evolution of the annual contribution from the autonomous communities to agricultural insurance ................... 64
Evolution of the annual contribution (ENESA + autonomous communities) to agricultural insurance..................65
Financial contribution made by ENESA, the Autonomous Communities and policy holders
in relation to the total cost ............................................................................................................................... 66
Contributions from the administrations to the cost of agricultural insurance..................................................... 67
Tables and Graphs
PAGE
132
5. PURCHASING AND DISTRIBUTION
Evolution of the value of accrued net premium by subsector (table).................................................................. 71
Evolution of the value of accrued net premium by subsector (graph) ................................................................ 72
Evolution of the sum insured by subsector........................................................................................................ 75
Evolution of the sum insured ............................................................................................................................ 76
Evolution of the number of policies by subsector .............................................................................................. 77
Evolution of the number of policies by type of collective policy holder .............................................................. 82
Evolution of accrued net premium value by type of collective policy holder....................................................... 83
Distribution of brokers by Autonomous Community. Purchasing of insurance. Year 2009 ................................. 85
Distribution of agents by Autonomous Community. Purchasing of insurance. Year 2009 .................................. 85
6. ASSESSMENT OF DAMAGES AND LOSS
Evolution of the expert network (table)............................................................................................................. 89
Evolution of the expert network (graph) ........................................................................................................... 90
Evolution of the expert network by sector ........................................................................................................ 90
Evolution of the number of loss claims ............................................................................................................. 93
Evolution of the total number of claims ............................................................................................................ 94
Evolution of the number of claims by sector ..................................................................................................... 94
Evolution of loss rate (table) ............................................................................................................................. 95
Evolution of loss rate (graph) ............................................................................................................................ 96
Evolution of loss rate by sector ......................................................................................................................... 96
Distribution of the cost of the claims and number of agricultural losses per risk. ............................................... 97
Map of hail risk distribution............................................................................................................................ 100
Map of distribution of frost risk affecting wine grapes.................................................................................... 102
Map of distribution of the risk of drought affecting dry farming. .................................................................... 106
Map of the distribution of wind risk ............................................................................................................... 109
PAGE
7. R&D&I IN AGRICULTURAL INSURANCE
Image from the AVHRR sensor on the NOAA satellite during the ten-day period 21/11/2009-30/11/2009...... 118
Evolution Curves for the NDVI Vegetation Index in the Region of Castuera (Badajoz), 2008 Plan.....................119
8. PROTECTION FOR INSURED PARTIES
Evolution of claim processing by customer service ......................................................................................... 124
Claim processing by the Customer Ombudsman Service (table) ..................................................................... 125
Claim processing by the Customer Ombudsman Service (graph) .................................................................... 125
Agricultural insurance. Evolution of overall quality by crop............................................................................. 127
Agricultural insurance. Evolution of overall quality by features ....................................................................... 127
Livestock insurance. Overall quality................................................................................................................ 128
Livestock insurance. Global trends in the quality issues by service and product............................................... 129
133
PAGE