Preferential agricultural insurance may begin only in 2013

The delay in the procedure for issuing licenses for agricultural insurance, as well as the absence of an Agricultural Insurance Pool, make it impossible to allocate UAH 70 million from the state budget to support farmers who would like to insure winter crops at a preferential rate. They will be able to get half the cost of insurance back only if they manage to conclude an agreement with a member of a pool that does not yet exist before October 15, or if the ministry violates the law.

Agricultural insurance with state support may not work this year. Yesterday, the National Financial Services Commission admitted that as of October 10, only four insurance companies received a license for this type of insurance, and the Agricultural Insurance Pool has not yet been created. At the same time, in order to receive budget support to cover 50% of the cost of insurance for winter crops, farmers must, by October 15, enter into contracts with licensed insurance companies (ICs) included in the Agrarian Pool, says the law “On the Peculiarities of Insurance of Agricultural Products with State Support,” in force since July 1 ". And although the director of the department of financial and credit policy of the Ministry of Agrarian Policy and Food, Bagrat Akhidzhanov, admitted that due to the weather the sowing period has been extended until October 25, they will not break the law.

All participants in the process are interested in the state program. “Based on the results of the last marketing year (from July 2011 to June 2012—Kommersant), losses due to unfavorable weather conditions amounted to about UAH 20 billion,” estimated the President of the Ukrainian Agrarian Confederation Leonid Kozachenko. According to Mr. Akhidzhanov, farmers are ready to insure, with the support of the state, 0.6 million hectares of land for winter crops. “The state budget for 2012 includes 70 million UAH for subsidizing the insurance of agricultural crops; in 2013, it is proposed to allocate 150 million UAH for these needs. If necessary, this amount can be increased by 30-50 million UAH,” he specified.

The National Financial Services Commission reported that Ukrainian Agricultural Insurance Company, Brokbusiness, Insurance Guarantees and Dominanta received licenses to insure agricultural risks with state support. According to unofficial information, a license was also issued to the Ukrainian Fire Insurance Company. According to the head of the IFC program "Development of Agricultural Insurance and Agricultural Finance in Ukraine" Gary Roche, these four insurance companies can begin the process of creating an Agricultural Insurance Pool, approve the charter and appoint management. “Currently, regulatory documents are being prepared and the charter of the pool is being discussed. Its creation depends on the insurers themselves,” he added. Deputy Chairman of the Board of Insurance Insurance Company Marina Staroseltseva assured Kommersant that the process of creating an Agrarian Pool has already begun.

The former leaders of the agricultural insurance market do not yet have licenses. “We have applied for a license, but have not yet received a response from the commission,” said Alexey Muzychko, head of the board of the Universalnaya insurance company. They didn’t get it at the Knyazha company either. "Unika" only submitted documents yesterday, and SG TAS and "Oranta" have not even done this yet. “Companies were in no hurry to prepare documents, because we proposed to postpone the creation of the Agrarian Insurance Pool until 2013, and now limit ourselves only to obtaining a license,” notes President of the League of Insurance Organizations Natalya Gudyma, adding that the need to create a pool is slowing down the implementation of the mechanism for subsidized insurance of agricultural products .

Market participants are afraid of market redistribution. “The pool is created for certain companies: the first to receive licenses were insurers who are not very well known in the market. As a result, the situation with agricultural insurance with state support is very similar to the situation happening in the Agrarian Fund: a number of companies are accredited with it, but they are insured only in one,” says chairman of the board of one of the insurance companies. Therefore, some insurance companies have already decided not to join the pool and take joint responsibility. “We will not take part in the pool. Why take responsibility for insurers who are little known in the market?” asks the head of the board of Knyazh, Dmitry Gritsuta. “We want to obtain a license and insure agricultural risks on the same terms as before. After all, after the law came into force, we do not have the right to do this within the framework of a property insurance license."

Victoria Rudenko

Newspaper "Kommersant Ukraine" No. 160 dated 10/11/2012, p. 6

Authors:

Victoria Rudenko

Themes:

Insurance business

State support will not work