Compulsory levy may be way out for farmers

New compulsory insurance levies or private policies covering farmers' and growers' "uninsurable" infrastructure are being suggested as one way of helping to deal with severe climatic events or natural disasters.

But a national farming leader said any such ideas would need careful examination first.

The compulsion suggestion is one of a range of options raised in a Ministry of Agriculture and Forestry discussion paper on how farms recover from such adverse events.

Referring to the "bigger picture of climate change", MAF's paper warned that the agricultural sector could expect an increased risk of drought, very heavy rainfall in some areas, higher temperatures and an increased risk of forest fire.

It examines options for "special recovery measures" on top of existing systems.

The paper said commercial insurance was available for a range of assets such as buildings, livestock, plantation forests and some crops.

But no insurance was available for infrastructure items such as tracks, culverts and water supply systems.

The paper suggested a compulsory producer levy, based on production, to pay for insurance to cover repairs to this sort of infrastructure.

"This would be a flat rate arrangement [potentially by sector] for all commercial primary producers and would not be based on risk."

A second option could be to compel primary producers to manage this infrastructure risk through private insurance. "Insurance companies could be expected to make policies available given the enforced demand and premiums would be based on risk," the paper said.

It suggested that a form of compulsory insurance would provide producers with certainty about disaster recovery.

But it warned that a levy could see low-risk producers subsidise high-risk producers, while compulsory private insurance could have very high premiums.

The North Island manager for MAF policy, Phil Journeaux, said another compulsory cover area that could be explored was for matters such as regrassing and recropping.

"Insurance in that area is pretty sketchy at the moment."

Frank Brenmuhl, the Federated Farmers board member with responsibility for climate change and adverse events, said compulsion would have to be carefully considered to see if it was affordable.

"We'd really need a cost-benefit analysis of where that's going."

Farmers tended to insure what they could, when the costs of doing so were acceptable.