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How are regulated the mutual funds for the management of risks in agriculture

The setting up of mutual insurance funds in the field of agriculture is a practice due to which farmers from many other states - such as France, the UK etc., have been resorting to for tens of years. The scope of such mutual funds it to supplement the coverage offered by insurance companies. 
 
If for crops insurers cover the risks of fire, torrential rain, storm, hailstone, landslide, early/late autumn/spring frost, mutual funds may further indemnify farmers also for the damages caused by organisms harmful to plants, environment incidents and unfavourable climatic phenomena, such as drought, flood, puddle forming etc.
 
In March 2015, in the Official Journal no. 169 was published the Norm no. 5/2015 issued by the Financial Supervision Authority, ("Norm") regarding the approval of mutual funds to manage risks in agriculture.
 
The new regulations comprised in this Norm establish the terms and documents based on which the Financial Supervision Authority (FSA) grants the prior approval in view of registering with the Register of Associations and Foundations and the operating license of mutual funds to mange risks in agriculture.
 
Thus, according to the Norm, the mutual fund managing certain risks in agriculture has the scope of insuring affiliated members in order to indemnify the losses caused by the occurrence of events, such as:
(a) unfavourable climatic phenomena,
(b) diseases of animals,
(c) organisms harmful to plants and the measures applied in order to eradicate and prevent their dissemination, and
(d) environment incidents.
 
With regard to the management of the funds, the Norm provides that such will be represented by a Management Board of the Fund made up of 5 members ensuring the executing of the decisions of the general assembly and authorizing an Executive Committee that may conclude legal deeds and fulfil any other attributions provided under the Articles of Association or established by the general assembly. The Executive Committee is managed by a General Manager under a mandate contract, which may not exceed 4 years.
 
Among the provisions of the regulations on captioned is also the fact that in order to be accredited, mutual funds for the management of risks in agriculture should cumulatively fulfil the following criteria:
(i) represent all agricultural sectors,
(ii) be represented in all counties, and  
(iii) have members exploiting over 30% from the farmland of Romania, inclusively the equivalent in  UVM (large cattle unit) of the held livestock.
 
Last but not least, we specify that the sources of financial indemnities that can be paid by the mutual funds for the management of risks in agriculture may originate from:
1) – the contribution of the European Union and from the State Budget,
2) – from the individual contribution of the members,
3) – from bank loans concluded in market terms;
4) – from amounts recovered from the third party liable for causing the economic losses to a member, member who received indemnities for such losses from the Fund.
 
Due to the major climatic changes over the last decades, changes about which specialists in the environment field talk more and more often, and with more and more concern, phenomena such as drought, flood and puddle forming are unfortunately no longer exceptions. The same goes in case of livestock diseases or organisms harming plants. In brief, such are potential risks, which cannot be left to hazard by any farmer and it is more than ever necessary to have the financial protection of insurance and of mutual funds to manage risks in agriculture.
 
By setting up mutual funds in Romania, we hope to be able to reach results similar to those recorded by France, as this is the only country reporting the attraction of European funds in the amount of Euro 84 million within the period 2010-2013, according to special report no. 10/2013 of the European Court of Accounts.