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Background and origin of the current agricultural insurance system

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The severe weather events in Spain were the catalyst for the creation of agricultural insurance and its subsequent development. By 1917 there were around twenty companies in operation insuring crops against the risk of fire. A large group of benefit societies and mutual insurance companies were also set up to insure livestock. In addition, some foreign capital companies offered insurance cover against hail.

In 1919 the National Mutual Insurance Company for Agriculture was created with the ambitious goal of covering all risks, but consequently it ended up focusing exclusively on hail. But the Government was obliged to come to its aid only two years later as the claims that this Society was responsible for were much higher than the premiums paid. In 1929 the Society became the Commissioner’s office of Rural Insurance, which in turn became the Agricultural Insurance Service in 1930, which in reality acted as a Reinsurance and Compensation Fund.

In 1934, the Agricultural Insurance Service became the National Rural Insurance Service. This entity operated until 1953, offering reinsurance cover to private insurance companies that insured against hail, fire and livestock mortality.

Unfortunately, this Organization carried a permanent deficit, given the impossibility of balancing insurance premiums with indemnities paid for claims, which depleted its reserves and forced it to request access to special credits. This led to the enactment of the 1953 Rural Insurance Law, which entrusted agricultural insurance to private initiative. The Insurance Compensation Consortium Law was subsequently approved in 1954. Thereafter an increasingly popular need began to grow for comprehensive agricultural insurance capable of covering multiple risks.

However, it would not be until the 1970s that national agricultural insurance underwent another significant change. The agricultural campaigns of 1973 and 1974 were at the origin of the creation of a Cereal Pool (A Pool of Co-insurers for National Cereal Insurance) which grouped together the insurance companies in order to manage combined insurance and which also offered fire and hail cover for cereals. 

The so-called Moncloa Pacts, approved on the 27th October 1977, included an agreement to present an Agricultural Insurance Law to the Congress of Deputies. The new legal text would replace the 1953 Law which, despite all efforts, had not achieved the results expected. Finally, in December 1978, Law 87/1978 on Agricultural Insurance was approved. Almost a year later, in September 1979, the Royal Decree No. 2329/1979 was pushed through, approving the implementation of the Law.

The new Law led to the creation of a series of institutions which, in addition to other important stakeholders, have contributed unique value and important stability to the Spanish Agricultural Insurance System. In this System, public and private entities collaborate together to the benefit of the agricultural sector.