Insurance of Agrarian Risks in Azerbaijan Requires Efforts of State Organizations (video)

Business Materials 26 September 2008 16:28 (UTC +04:00)

Azerbaijan, Baku, 26 September / Trend /

Leyla Abdullayeva, expert of Trend Analytical Center

Today the agrarian sector in Azerbaijan lost its positions in the national economy. The collection of the industrial crops of cotton growing, tea growing, tobacco-cultivation and viticulture especially sharply reduced. The first plan includes the tasks of developing the system of insurance of the agricultural production. The insurance in the agricultural sphere of Azerbaijan is one of less developed sectors, its share in the general portfolio of insurance comprises less than 1%.

The problem of the financial protection of their property interests in view of the high dependence of the agrarian sphere of the economy on the spontaneous forces of nature always stands before the agricultural producers. Thus, for instance, natural cataclysms in Azerbaijan showed the importance of the development of insurance in the agricultural sector at the beginning of the present year. The forces of nature are not predicted. Therefore, there is insurance with one of the effective instruments of managing risks in the agriculture and making it possible to ensure stable conditions of the production activity of economic subjects irrespective of the natural anomalies.

The insurance of the agricultural production is an important element of the system of financial-credit provision. At present in the world there are different systems of the agricultural insurance supported by States. Thus, for instance, in Greece the system of insurance is in the hands of State. Through its state insurance company the State collects insurance payments, manages functioning of the program and covers losses. Commercial insurance companies deal only with the insurance of the cultures, which do not have support from the State.

The systems based on the close co-operation of state and private sector effectively work in Spain and Portugal where the State plays a key role, ensuring the subsidy of insurance premiums and re-insurance. In Italy, France, Austria and Germany the preference is given to the private sector.

But in each system of the insurance of agriculture there is one special feature - its high cost. Taking into consideration the climatic risks, the insurance companies should establish higher tariffs in the agrarian sector than in other branches in order not to prove to be in the loss. Only with the real state support it will be possible to reach the equilibrium between proposal and demand in this the field and speak about the creation of the system of agricultural insurance capable to give real guarantees to producers in the entire country. State must push slightly farmers to the insurance, not only explaining its need, but also assuming part of the insurance payments of producers.

The development of the agrarian sector in Azerbaijan can become one of the priority directions of the national economy, being serious alternative to the oil sector of the country. The farmers need support for this. State repeatedly rendered financial aid to the agrarian sector, special attention was paid to the agricultural production. New stage for the development of the country's agrarian sector must be State Program on Reliable Foodstuffs Supply for Population of Azerbaijan in 2008-2015, which was approved by the President of the country. The Program envisages measures on insurance in the agriculture. The measures imply the introduction of contemporary insurance in the agricultural production, and also the improvement of the list of risks for the financed agricultural property.

It is early to speak of how this system will function in Azerbaijan in future, but the experience of other countries testifies that it is necessary to accept at least 5 years with the prospect to form the system. Usually firstly the basic concept of the system of agrarian insurance is devised, in which it is desirable to prescribe the role of basic sides (state, insurance companies and producers) and to determine the tasks of system, and then it is possible to make additions.

For example, in the USA the system constantly develops and the Government makes changes, introducing provisions to the Law on Agrarian Sector. Here it is necessary to note that such changes in the USA mainly deal with financing of program and procedure of subsidies.

As a whole, the functioning of system is realized by introducing laws and provisions on institutions, which are responsible for the agrarian insurance (Agency on Control of Risks, Federal Corporation for Agrarian Insurance). In Spain the basic condition of the system is fixed in the law on agrarian insurance. There are appropriate legislative documents in Canada at the level of provinces.

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