Main Factors of the Development and Attractiveness of the Insurance Market for the Agricultural Companies

The article aims to analyze the determinants of the development of the insurance market in agriculture from a strange and secondly, to disclose the farm interest and activity to insure. Data from special survey conducted among 225 farms in 2011 used. The results are compared with some other research scientists from the EU and the U.S. in this area. The agricultural insurance sector in Bulgaria is presented in the broader context of the transition to a market-oriented economy and integration of Bulgarian agriculture into the EU Common Agricultural Policy. The recent developments on the determinants of farm insurance adoption in the agricultural economics and finance literature are discussed. A probit econometric model is used in order to determine the factors explaining the adoption or non-adoption of farm insurance by the surveyed farmers. Taking into account endogeneity bias between farm economic performance and insurance adoption, we find that insurance is taken out by larger and more profitable farms, which suggests the existence of financial constraints for access to agricultural insurance in Bulgaria. Additionally, the analysis shows that those farmers who do not rely on self-insurance strategies are more likely to have taken out insurance. However, the evidence concerning the effect of on-farm risk management strategies is mixed: while crop diversification and contracting are complementary to insurance, geographical dispersion of farms plot appears to be more a substitute. Off-farm income is both a complement and substitute to insurance, according to the off-farm income level. The existence of strong regional effect suggests the importance of adapting the insurance products to the different regional contexts in Bulgaria.