Agricultural insurance pool to be created in Azerbaijan

Business Materials 8 March 2013 16:14 (UTC +04:00)
An agricultural insurance pool in accordance with international practice requiring public support is to be created in Azerbaijan.

Azerbaijan, Baku, March 8 / Trend I.Khalilova /

An agricultural insurance pool in accordance with international practice requiring public support is to be created in Azerbaijan.

According to the chairman of the Başak İnam Sığorta insurance company Orkhan Hasanov, some action is expected on the establishment of an agricultural insurance system in the country by the State Insurance Supervision Service under the Ministry of Finance.

"Talks on the creation of the insurance pool are currently underway and perhaps in the near future we will hear about it, as the development of agricultural insurance is in interests of the agricultural sector of Azerbaijan. Today, there is practically no company involved in this area because of certain difficulties present on the market. In order to even insure cattle to be used by banks as collateral, it must be registered with certain public bodies," Hasanov said.

Among other problems faced by the development of agricultural insurance is the difficulty of identifying entrepreneurs as farmers. Inaccurate statistics prevents assessments being made of this sector and forecasting. The use of land for other purposes also hinders the development of the agricultural sector and consequently, agricultural insurance.

Although agricultural insurance is a priority for Başak İnam Sığorta and the company continues its campaigning policy as well as always being ready to offer its services to banks, in 2012, the company reduced the rate of agricultural insurance.

"We are expecting some action from the State Insurance Supervision Service which supports this initiative, as it contributes to the development of the agricultural sector. However, such a structure may not be established in such a short period as it requires some elaboration.
"Similar practices are observed in countries with a developed agrarian sector, including Turkey (TASIM), Holland and France. Such pools are created with state support and all the insurance companies become parties to it, as insurance agents. Given its establishment in Azerbaijan, Başak İnam Sığorta may become one of its leaders," Hasanov said.

According to him, to date the state compensates half the insurance premiums for support of the agricultural sector.

"This system has to be under some control. Turkey, for example operates the insurance pool TASIM, whereby insurance companies pass over 100 per cent of the risk and the pool regulates all matters relating to the insurance of agriculture of the country and covers any damage," Hasanov said.

The difference from the agricultural pool of Azerbaijan's Bureau of Compulsory Insurance, where insurance companies are responsible for their own policies, is that as TASIM's experience shows, insurance companies will not bear responsibility, but rather act as insurance agents.

As the head of the State Insurance Supervision Service under the Ministry of Finance Namik Khalilov said earlier, Azerbaijan has developed the necessary legislation for promotion of insurance in the field of agriculture.

"Each year a certain amount of money is allocated from the state budget for hedging risks in the agricultural sector, but local farmers have shown little interest. Therefore, out of the total amount allocated from the state budget, only nearly 10 per cent is being used," Khalilov said.

According to him, a joint working group with participation of representatives of the Ministries of Agriculture and Finance has been created for studying international experience in this field and making appropriate proposals.

The state-owned commercial insurance company AzərSığorta has previously submitted proposals to the government for the allocation of additional funds for agricultural insurance. The company's offers include 100 per cent coverage of the insurance contract in the field of agriculture, while at the present time coverage in this area is at 50 per cent. The proposals were developed in response to the fact that most farmers do not insure their farms due to lack of additional funds.

According to the amendments to the law 'On support and development of agriculture in Azerbaijan' approved in the summer of 2007, the public share of premiums in agricultural insurance has been increased from 25 per cent to 50 per cent. Along with wheat, barley, corn, sunflower, potatoes, sugar beet and vegetables have also been included in the list of crops insured through the state budget

The average tariff on agricultural insurance equals nearly 1500 manat per year and the average profit per hectare of land is about 25,000 manat per year.

The official exchange rate is 0.7849 AZN / USD on March 8.