ISSN: 2222-6990
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Agricultural production faces myriad of risks. Nevertheless, two major risks are of
concern to the agricultural sector- price risk caused by potential volatility in prices and
production risk resulting from uncertainty about the levels of production that primary
producers can achieve from their current activities. It is likely that these major risks will
increase in the future – price risk due to liberalization of trade and production risk
caused by the effect s of climate change. Agricultural risks not only affect farmers, they
also affect the whole agribusiness value chain. Each of the participants along the
supply chain, from the Government, Financial Institutions, suppliers of inputs, the
distributor, the trader, the processor and the end consumers, are subject to these
risks.
Agricultural investments unfortunately are among the most risky economic ventures
one can embark upon, the absolute dependence on unpredictable weather conditions,
like storm, flood, drought and other natural hazards make income from crop products
and agricultural products like livestock poultry and dairies to be very unstable.
Agricultural Insurance policies serve as securities for banks as indemnification for
financial losses suffered by farmers and those in the agricultural value chain resulting
from damages to their products, and also provides funds for servicing such loans. This
paper is concerned exclusively with the role of agricultural insurance in the
agribusiness and in the development of the economy. It gives an introduction and a
review of the agricultural sector that led to the agricultural insurance decree in 1993.
The paper describes the various products available under the agricultural insurance
while a section was devoted to analyzing the economic impact of agriculture Insurance
on the economy, then conclusion and recommendations.
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