Brussels, 16 May 2023
The European Commission has approved, under EU State aid rules, a €1.3 billion Polish scheme to support agricultural producers to pay insurance premiums covering the risk of damage to certain vegetable products and livestock species. The measure contributes to the achievement of the objectives of the Common Agricultural Policy by helping preserve stable incomes for agricultural producers.
The Polish measure
Poland notified the Commission of its plans to adopt an around €1.3 billion (zł6 billion) scheme that aims to ensure coverage for the risk of damage to certain vegetable products and livestock species caused by certain adverse climatic events, such as hurricanes, floods, landslides and avalanches.
The scheme is open to small, medium, and large companies active in agricultural primary production in Poland who subscribe insurance coverage with insurance companies selected by the Polish authorities following an open tendering procedure. The eligible beneficiaries are entitled to receive an aid amount of up to 65% of their insurance premiums, provided that those do not exceed certain thresholds.
For the event of drought specifically, the scheme includes a State reinsurance mechanism whereby Poland will cover part of the compensation payments that insurance companies would need to pay to agricultural producers.
The scheme will run until 31 December 2027.
The Commission’s assessment
The Commission assessed the scheme under EU State aid rules, in particular Article 107(3)(c) of the Treaty on the Functioning of the European Union (‘TFEU’) and the 2023 Guidelines for State aid in the agricultural and forestry sectors and in rural areas.
The Commission found that:
- The measure helps preserving stable incomes for agricultural producers and thus contributes to the general objectives of the Common Agricultural Policy of fostering a smart, competitive, resilient and diversified agricultural sector and ensuring long-term food security.
- The scheme is necessary and appropriate to address a market failure as, due to the high prices of insurance policies, agricultural producers would not be willing to purchase insurance policies without subsidies covering part of the insurance premium. Furthermore, the State reinsurance mechanism for the event of drought is necessary, as insurance companies would otherwise not be willing to cover the risk of drought.
- The measure is proportionate, as it is limited to the minimum necessary to achieve its objective. Moreover, its positive effects outweigh any potential distortion of competition and trade in the EU.
On this basis, the Commission approved the Polish scheme under EU State aid rules.
Background
In December 2022, the European Commission adopted revised State aid rules for the agricultural and forestry sectors. The revised rules align State aid with the EU strategic priorities, in particular the Common Agricultural Policy (CAP), the Common Fisheries Policy (CFP), as well as to the European Green Deal. The revised Agricultural Guidelines introduce the following main changes: (i) a new, simplified procedure for the authorisation of State aid for measures co-financed under the CAP; (ii) an enlarged scope of measures targeting animal diseases and plant pests, allowing for aid to be granted for emerging animal diseases and certain invasive alien species; (iii)_new incentives for farmers to commit to schemes under which they respect stricter environmental standards than what is required by law.
Among others, the Agricultural Guidelines allow aid for the payment of insurance premiums, where the insurance concerns primary agricultural production, to cover the damage caused by certain events, including: natural disasters or exceptional occurrences, animal diseases, plant pests and invasive alien species, the removal and destruction of fallen stock and damage caused by protected animals or other adverse climatic events. The aid may also cover damage caused by an environmental incident, provided that its occurrence was formally recognised by the competent authority of the Member State concerned. Reinsurance schemes are also eligible under this category of aid and are examined on a case-by-case basis.
The non-confidential version of the decision will be made available under the case number SA.107026 in the State aid register on the Commission’s competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.