Solutions for Better Agri-Risk Management in the European Union

World Bank

Solutions for Better Agri-Risk Management in the European Union

Autores

World Bank

Editor

Washington, DC: World Bank

Descripción

Globally, the agri-food system is facing an increasingly complex and volatile risk landscape. Traditional risks, related to production, markets, finances, and others, are now compounded by climate change, geopolitical instability, pandemics, and digital vulnerabilities. These evolving threats are intensifying existing challenges, such as droughts and floods, and are undermining farmers’ ability to invest, innovate, and sustain productivity. There is increased global attention to these evolving risks and recognition of the importance of responding through proactive, integrated risk management strategies that combine public and private instruments, such as climate-smart investments to de-risk farms, insurance to transfer risks, and disaster relief to alleviate the impacts of adverse events. Despite a global trend of increased public spending on agricultural risk management, significant protection gaps remain. In Europe, climate-related risks are particularly acute and driven by drought, while new risks are rising. Drought alone accounts for over 50 percent of climate-related agricultural losses and remains significantly underinsured across much of the European Union (EU), see fi-compass (2025). Market and biosecurity risks are growing and leading to billions in losses to the European farmers. Some of these risks are exacerbated by climate change, but others represent new shocks, particularly considering regional geopolitical developments. All call for increased resilience, which must rely on an effective combination of risk mitigation (through preventive actions, such as climate-smart investments, diversified and systemic transformation of supply chains, early warning systems, etc.), risk pooling and transfer (better insurance/mutualization products with more inclusive coverage, innovative tools at country and regional level, etc.), and risk coping (swifter and more targeted ex-post response). To better understand the uptake of CAP-funded ARM instruments, the study uses cluster analysis to group and select deep-dive EU Member States based on five key variables: water stress, utilized agricultural area, agriculture’s share in GDP, farm structure, and yield volatility. Based on this, five distinct country segments were identified, each with unique risk exposure and structural characteristics. These clusters help streamline policy analysis and inform targeted recommendations. For deeper insight, five countries, Bulgaria, France, Latvia, Italy, and Slovakia, were selected for qualitative and quantitative deep dives, reflecting a range of experiences with CAP-funded risk management tools and diversity of agricultural structures across the EU.