Bankassurance as financial instrument in agricultural risk management

Abstract

One of the very important problems in the agricultural production that existed for a long time is the risk from some weather adversity (hail, frost, flood, drought, storm, etc.), that is responsible for catastrophic consequences. On the other side, agricultural production is a specific area of business that is also strongly influenced by market, financial and institutional factors. These are all the dangers that do not depend on the will of man and his work, therefore it is necessary for farmers to recognize and predict the risks. There are different economic tools, which could be used to reduce the consequences from possible losses and bankassurance presents one of new products of risk management. It arises from the fact that there is need in agricultural production, through the provision of financial resources for the start of some production, also to provide simultaneously insurance against potential risks. Bankassurance is a financial instrument that integrates banking and insurance offer in the common financial market, and for farmers, this product is a combination of loans and insurance that can stabilize its revenues, but also to secure invested capital in the production. This paper presents the characteristics and advantages of bankassurance, i.e. the assignments of all three primary participants in this activity — the farmer, the bank and the insurance company. On the other side, a practical example of using bankassurance in agriculture is given and the specific advantages for farmers that are primarily connected with more favorable price of this new product are pointed out (simultaneously protects from several sources of risk - financial, production and market), but there is also additional security through the agricultural insurance.