Designing public-private crop insurance in Finland

Abstract

The Crop Damage Compensation scheme (CDC) is a combination of farm - and area - based scheme covering crop losses in Finland. The scheme is fully financed by the government. It is about to be abolished and a new risk management tool based on public private partnership will be in place in 2016. In this study, we analysed how government expenditure will change due to the policy shift to public– private farm - basedcrop insurance. A stochastic simulation model using FADN and CDC data was developed to examine the risk exposure of farm based insurance. Government’s risk exposure reduces when the policy is shifted towards the new type of crop insurance. Model results also indicat ethat the mean expenditures for the government as well as the variability of expenditure between years are expected to be lower under the new crop insurance than under the CDC scheme. Results obtained support government’s decision to terminate the CDC scheme.