Government support for agricultural risk management tools has been substantially growing over the past twenty years, resulting in a wide diversity of risk management products. Risk management programmes can support resilient agriculture by safeguarding that producers can manage the financial impacts resulting from adverse events and by creating incentives for farmers to invest in risk reducing measures.

Risk management tools effectiveness is depended on programme design. Governmental support on Risk Management Policies differs amongst countries. Some largely focus on ex ante mitigation measures (i.e. R&D), whilst others provide large levels of support through agricultural insurance, disaster assistance, income stabilisation schemes and producer tax savings accounts. Evidence indicates that due to politics ending the provision of ad hoc assistance through subsidised insurance programmes is not possible, even in cases where insurance risk programmes are well-established. Additionally, several risk management programmes are lacking transparency on basic data and comprehensive evaluation of impacts.

According to the conclusions drawn in one of OECD recent publications (DESIGN PRINCIPLES FOR AGRICULTURAL RISK MANAGEMENT POLICIES, May 2021) agricultural risk management tools should adopt a holistic approach to ensure their complementarity, to avoid overcompensation, and to reduce adverse selection and moral hazard behaviour. Agricultural Risk Management Policies need to reflect both the interaction between different risk management tools and the wider environment that affects incentives and producer decision-making.

Tax and savings measures may be effective tools for producers relative to smoothing their income variability but cannot on their own mitigate the impacts of catastrophic events. At the same time Matched savings accounts do not address the needs of farm risk management, as by design they couple high subsidy rates in the form of matching funds and low limits in the total balance. Regarding income stabilisation schemes impacts and experience is limited as few countries have implemented them.

Government support focus needs to be turned into addressing market failures, as heavily subsidised market instruments can sideline private innovation. Nowadays the development of remote sensing technologies, improved weather data and widespread availability of CTI technologies can effectively support commercially offered crop insurance. Nonetheless, private insurance products cannot be competitive when facing heavily subsidised government products. The focus of government programmes should be on exploring potential opportunities and creating incentives for technological innovation to reduce the costs of risk management tools. Additionally, government subsidies should be limited to covering administrative costs or catastrophic risks.

Farmers' participation in risk management programmes can be enhanced by studying and pinpointing the root causes of lack of participation, instead of resorting to subsidies to encourage participation. Moreover, the attractiveness of risk management tools is often reduced by the wider policy environment. The regrettable lesson learned is that once subsidies are introduced for risk management products, they are difficult to be removed from agricultural policies and programmes.

The lack of transparency on basic data of risk management programmes is a common feature that surrounds these programmes. Data reported by countries to OECD and WTO involve mainly outlay data, whilst little is known about farmers’ participation and performance data across farms, crops and livestock. There is thus a need to improve data accessibility that can enhance the programmes’ monitoring and evaluation and provide information and experience which can ultimately lead to the design of better instruments.