Hungarian Agricultural Risk Management System

From EPSA - European Public Sector Award


The public agricultural risk management system building in Hungary started with the I. system between 1997-2003 was offering a 30 % flat rate subsidy to insurance fees. Problems: continuous mishmatch between risks covered by insurances and damages caused by risks, only 30-40% penetration. II. system between 2007-2011, the National Damage Mitigation Fund against all risks. Problems: low penetration, very high compensation claims vs. low rate of damage mitigation, high administration burden, reduced number of insured farmers.

In 2012 the Ministry recognised the need to develop a complex Hungarian Agricultural Risk Management System (HARMS) to achieve this objective several public organisations with the coordination of the Ministry of Agriculture (e.g. Hungarian State Treasure, Hungarian Meteorological Service, NAK. and others) formed a consortium and in a public administration project (EKOP 1.1.12. 2011 -2012 MKR) harmonized their IT and data management system, and developed a new risk registering and paying system. The main innovative features of HARMS are: 1) Common risk definitions, common reference crop yields in the pillars 2) Interdependencies of pillars – only 50% of mitigation payments without insurance and the compensation payment is deductable from mitigation payments 3) Continuous development of the system based on a yearly analysis discussed in a multi-stakeholder workshop and the decided changes financed from a dedicated fund.

I. Pillar: Agricultural Damage Mitigation System (2012-): consists of an aggravated agricultural loss mitigation system, which provides support for adverse weather conditions (drought, inland water, agricultural flood, winter frost, spring frost, autumn frost, rainstorm, storm, hail), approved by the European Commission. This subsidycompensates producers for over 30% of the loss of yields at the crop level. Participation in the Compensation Scheme is mandatory for producers of: 1) arable crops on at least 10 hectares, 2) vegetables on at least 5 hectares, 3) with a plantation of at least 1 hectare. The farmers can join the scheme on a voluntary basis below the minimum areas, in which case they must be a member for at least 3 years.

II. Pillar: Voluntary insurance subsidized by the state (2012-): is financed by the Rural Development Program from 2016, which annual support amount has increased to HUF 4 billion, and in 2018 the amount has increased to HUF 5 billion. Up to 65% of the net insurance subsidy may be granted for insurance premiums for the most important arable crops and horticultural crops . If the demand by the producers exceeds the available resources, the aid intensity will decrease. However, the minimum intensity must not be less than 30% of the premium paid by the producers. Thanks to the introduction of insurance premium support, more and more destructive risks, such as drought, rainstorms, spring frosts or agricultural floods, have been insured in Hungary.

III. Pillar: National Ice Damage Prevention System (2018-): Based on the successful operational experience of the South Transdanubian soil generator ice damage prevention system since 1991, the Ministry of Agriculture has initiated the expansion of the system into a national system. The Rural Development Program has provided an opportunity to support 100% of the development of the national ice damage prevention system by the National Chamber of Agricultural (NAK). Ministry of Agriculture provides professional support and operational resources. NAK has created 3 new logistics centers and has developed the system by dividing the country into 4 regions. The 2018 compensation year confirmed our positive expectation because in spite of being a stormy year the number of hail claims and the aeria of affected land has been cut off by 70% compared to the 2017.

IV. Pillar: Income Stabilization Tool (~2019/2020-): We very close to be able to introduce an agricultural income stabilization tool which will compensate farmers for unforeseen market fluctuations (such as the milk market crises in 2016) or the consequencies of animal health and phytosanitary disasters (such as avian flue or flavescens doreé). We will implement it through an Income Stabilization Fund which is also a possible, but until now unused measure of the Rural Development Program. The producers will pay an annual income stabilization contribution to the Fund and if the farmer income decreases by more than 30% compared to its reference income in the current year it may qualify for income stabilization compensation.

V. Pillar: Draught Mitigation System (~2020/2021 -): We are still in the early phase of planning a risk mitigation tool to help the reconstruction and maintaining of local channels. These local channels are the key to increase the possibility of sustainable water retention and management in arid aerias of Hungary.

Hungarian Agricultural Risk Management System (47.49551279710559, 19.049466848373413)
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