IFC coordinates joint action plan for introduction of agricultural insurance in Azerbaijan

Business Materials 24 December 2014 17:02 (UTC +04:00)

Baku, Azerbaijan, Dec.24

By Azad Hasanli - Trend:

Azerbaijan will be able to become an exporter of experience in agricultural insurance to the other countries already in three years after the introduction of the mechanism of this type of insurance, an employee of the project on the investment climate of the International Finance Corporation (IFC), Hasan Huseynov said.

The Azerbaijani government is highly interested in the implementation of agricultural insurance as a tool for protecting agricultural production from the weather risks, Huseynov told Trend Dec.24.

"Azerbaijan is developing rapidly, raising one industry after another," he said. "The financial sector is also developed at a high level. The insurance employs highly qualified specialists, service is rendered at a level acceptable for world standards, a long-term partnership programs with European reinsurers are formed. All these indicators suggest that that the insurance market has quite a powerful platform for the construction of agricultural insurance."

The government realizes that agricultural insurance plays an important social role (protecting production from extreme weather events), revenue generating role (the government can plan a budget, annually allocating a certain amount on the development of agricultural insurance, instead of looking for huge amounts of money in case of global cataclysms), as well as the investment role (lenders are more willing to give money for a loan, knowing that the weather risks are covered by insurance), according to the representative of the IFC.

At the same time, Huseynov said that one cannot expect the instant results and one cannot avoid difficulties in this issue because of the problems in the agricultural sector.

"Agricultural infrastructure is not yet developed, there are problems with irrigation, shady distributors cover a large part of the market, technology is outdated, size of farms is small," said the expert. "The Azerbaijani government is well aware of these and other problems, and a full-scale program for the development of villages is launched at this stage, one of the directions of which will be agricultural insurance."

He said that currently the IFC and the government work hard to harmonize cooperation plan for the implementation of this program, taking into account economic, climatic factors and the level of development of the agricultural sector in Azerbaijan.

"IFC aims to convey the knowledge to the Azerbaijani government and the private sector about what is needed for the creation of an effective system of insurance of farmers against weather risks and how to manage this process at all levels," he said. "The insurance industry cannot exist without certain data (weather conditions, crop yield, satellite data, etc.), professionals who understand what the weather risks are and how to evaluate them, the legal framework, defining the rules of the game on the market and other issues. IFC plans to teach all this and much more to the Azerbaijani counterparts, which will then professionally handle this direction."

Regarding the timing of the provision of technical support from the IFC, Huseynov said that this issue will be agreed with the government of Azerbaijan.

"Of course, this work will not last only one year and a key objective of this project is to construct a clear, viable, sustainable and autonomously functioning system," said Huseynov.

The agricultural insurance market potential in Azerbaijan is estimated at 150-200 million AZN, according to the participants of the insurance market of the country.

However, the fees under this type of insurance amounted to 2.39 million AZN (with total fees of 382.81 million AZN) with payments of 430,040 AZN (143.5 million AZN) for 11 months of 2014. For the same period last year, the fees amounted to 914,200 AZN (368.9 million AZN) with payments of 537,660 AZN (110.48 million AZN).

The official exchange rate for 24 December is 0, 7844 AZN / USD.


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