Municipal-Level Risk Differentiation as a Tool for Improving Financial Sustainability of Public-Private Agricultural Insurance Schemes: Evidence from Georgia

Abstract Georgia’s public-private agricultural insurance system faces significant challenges, including low farmer awareness, prevalence of small farms, and spatial heterogeneity of climate risks. This study aims to develop a municipal-level, risk-based premium model and assess its impact on the financial sustainability of agricultural insurance. The methodology is based on official statistics from 2014–2024, data from insurance companies, and international references, incorporating historical loss analysis, calculation of municipal risk coefficients, and formulation of net and gross premium rates. The results indicate that risk-adjusted premiums differ substantially from uniform rates, providing stronger financial buffers in high-risk regions and reducing the net loss ratio. Empirical analysis confirms that municipal risk coefficients explain the majority of observed losses. The study demonstrates that a municipal risk-based approach improves the financial resilience of the insurance system, optimizes subsidy allocation, and enhances farmer participation. These findings offer evidence-based guidance for designing sustainable and efficient agricultural insurance schemes in Georgia.