August 18, 2026
By Olivia Richardson and Malorie Bertrand
The recently released Halifax Statement establishes a collective vision for a more competitive, innovative and resilient agriculture sector. As federal, provincial and territorial Ministers of Agriculture continue shaping Canada’s Next Policy Framework (NPF), an opportunity exists to improve agricultural risk management programs by helping farmers manage risks before they occur, not just after losses happen.
The Smart Prosperity Institute (SPI)’s latest report with Farmers for Climate Solutions, Growing in a Riskier World, explores how innovative insurance tools can reduce barriers to adopting agricultural practices that improve food system stability and strengthen on-farm resilience.
Canada's current agricultural risk management system is primarily designed to compensate farmers after losses happen. These programs are essential, but rising losses are creating increasing pressure on governments, insurers, and taxpayers. This has prompted interest in approaches that help reduce risks before they result in insurance claims.
Beneficial management practices (BMPs) such as cover cropping, improved nutrient management, and reduced tillage can mitigate the impacts of climate change and, sometimes, market risks, such as volatile fertilizer prices. These practices address uncertainty by improving soil health, strengthening farm resilience, and supporting farmers’ profitability.
While BMPs can deliver long-term benefits, adopting them comes with risks. Farmers may face new costs, operational changes, and short-term impacts on their yields and income. These risks mean that many producers need additional support to manage the transition. Aligning risk management programs with resilience-building practices, like BMPs, can support these positive outcomes. Innovative insurance products are needed to promote this proactive approach.
The report describes how BMPs can measurably reduce public and private insurance payouts while reducing the vulnerability of farms to extreme weather events. This emphasis on building resilience before crises occur closely aligns with the Halifax Statement’s call to improve the sector’s ability to anticipate, withstand and adapt to disruptions and risks.
SPI’s research explored two insurance innovations that could help bridge the gap between the long-term benefits of resilience-building practices and the short-term risks of adopting them.
1) Transitional coverage
Transitional coverage helps protect farmers from short-term yield or income losses while they test and adopt new practices. Transitional coverage tools, like BMP insurance and production warranties, are well-suited for practices with low adoption costs, such as optimizing nitrogen fertilizer rates. By providing targeted, conditional protection during the transition period of adopting a new practice, BMP insurance and production warranties can cost-effectively improve on-farm resilience. This gives farmers a financial safety net when the outcomes of adopting a new practice are uncertain.
SPI’s report describes how U.S.-based initiatives such as the BMP Challenge and Post-Application Coverage Endorsement (PACE) program, as well as domestic ones like Prince Edward Island's Ecological Goods and Services pilot, have used transitional coverage to better share risk and to support practice adoption. These initiatives, and other research outlined in the report, provide valuable lessons on how transitional coverage tools can be designed for Canadian agriculture.
2) Insurance premium incentives
A second opportunity involves recognizing proactive risk reduction through insurance pricing and coverage design.
Insurance premium incentives, or programs that offer discounts or enhanced coverage at no additional cost if practices that improve on-farm resilience over time are adopted, can help farmers take steps to reduce future risk. SPI’s research finds that insurance premium incentives can promote incremental adoption of BMPs and incentivize farmers to sustain these practices. These tools recognize early adopters of BMPs, filling a gap in current policy programming and incentivizing continued efforts to build resilience.
Canadian pilot programs are already testing these ideas, including Alberta's premium discount pilot, Ontario's cover crop insurance pilot and Manitoba's forage establishment discount program. While still relatively small in scale, these pilots offer valuable opportunities to gather evidence and better understand how insurance pricing can be adjusted to more effectively incentivize resilience-building outcomes.
SPI’s work outlines further research needed to develop insurance premium incentives, such as assessing the link between BMPs, environmental outcomes (e.g., soil organic carbon, biodiversity, etc.) and reduced insurance risk, as well as engaging with farmers to understand their interest in these tools.
Key report takeaway: Insurance can do more than compensate farmers after losses occur. It can also support the adoption of practices that reduce risk and build resilience on Canadian farms.
As climate risks continue to increase, our research suggests that these insurance innovations offer an economical way to strengthen resilience in Canada’s agriculture sector. By supporting the adoption of BMPs that improve soil health, stabilize yields, and reduce exposure to climate-related impacts, these tools can help lower future insurance claims, reduce pressure on publicly funded risk management programs, and improve long-term farm profitability.
The goal is not to replace existing business risk management programs, but rather to explore how they can be complemented with additional insurance tools that help farmers manage emerging risks and build resilience. These innovations are also especially promising as they build on existing insurance infrastructure and are cost-effective. Transitional coverage can complement cost-share programs by helping farmers manage the risks associated with adopting new practices. Insurance premium incentives can be integrated into existing policies with relatively low administrative burden. Together, these approaches can contribute to lower public spending, more financially stable farms, and improved environmental health.
Realizing this potential will require collaboration across the value chain. Insurers bring risk data, actuarial expertise, and delivery infrastructure, while governments can support innovation through policy development, pilot projects and strategic funding. Lenders, agri-food companies, researchers, and producer organizations can contribute complementary financing, technical assistance, and incentives that help farmers adopt BMPs.
By better coordinating insurance innovations with cost-share programs, financing tools, technical support, and other risk management initiatives, Canada can create a more integrated system that not only helps farmers recover from losses but also reduces their risk exposure in the first place. This shift from reactive to proactive risk management is key to building a more resilient and competitive agriculture sector.
SPI’s report points to three ways that insurance innovation can be advanced in Canada’s agriculture sector:
Canada's agricultural risk management system was built to help farmers recover after losses occur. With climate and market risks continuing to evolve, there is an opportunity to complement that approach with tools that help reduce risk before losses happen. As governments develop the NPF, proactive insurance innovations represent a practical opportunity to advance the Halifax Statement’s vision of a more resilient, innovative and competitive Canadian agriculture sector.
To learn more, read the full “Growing in a Riskier World” report and explore our team’s other work on advancing a stronger, more resilient agriculture and agri-food sector in Canada. To reach the team, please email info@smartprosperity.ca.
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