Gov’t keen on promoting agricultural insurance

By: Amina Nazarli

Azerbaijan plans to adopt a new law on agricultural insurance in 2015, said Namig Khalilov, Head of the State Insurance Supervision Service under the Finance Ministry.

He noted that some insurance companies offer insurance services in agricultural field. However, the new legal framework will pave the way for changes of the mechanism of state incentives in this area.

“In parallel with the new law, it is necessary to implement much work including: preparing insurance products for different types of agricultural products and determining tariffs related to the type, regions and climate conditions. Moreover, insurance specialists play a big role in the stages of signing contract and determining the damages’ extent. It is necessary to establish a training system and certification of specialists in the field of agricultural insurance,” Khalilov told Trend.

Khalilov also stated that e-information system of agricultural insurance, which will include farmers’ data should be integrated with the information system of the Agriculture Ministry. “After the law adoption much technical work should be done, what will be possible for the next year,” he added.

Khalilov said that the experience of various countries, including Turkey has been studied during the law development. “We studied Turkish experience, which ensures certain public assistance: in the form of grants, subsidies, soft loans, issued for the goods, for which the funds will be spent. Probably, we will also use the same option,” he stressed.

According to the approved amendments in the law “On assistance and agricultural development in Azerbaijan”, back in the summer of 2007 the share of public financing of premiums in agricultural insurance has increased from 25 to 50 percent.

Alongside with wheat other things like barley, maize, sunflower, potatoes, sugar beet and vegetables were also included in the crops list, insured by the state budget. The average agricultural insurance tariff in Azerbaijan is about 1,500 manat per year ($1,921) (five percent per hectare). The average profit per hectare is approximately 25 thousand manats per year.

Annually an amount to cover 50 percent cost of the insurance contract is issued by the government. However, it almost is never used by 100 percent. The specialist says one of the reason of undeveloped agricultural insurance is that many farmers do not have information about insurance as well as their opportunities (capacities).

Many specialists say Azerbaijan’s current agricultural insurance market potential is estimated at 150-200 million manat. However, the amount of insurance premiums for this type of insurance in January-October 2014 stood for 2,264,830 manats (insurance of plant products – 340,100 manats, animals – 1,924,727 manats). This figure corresponds to 0.64 percent of the total market insurance in the country. Agricultural insurance payments were made at 154,370 manats (0.12 percent of total insurance premiums), 22,660 manats of which went to plant products insurance and 131,710 manats — for animals.

In January-October 2014 the volume of agricultural production in Azerbaijan was 4,637,500 manats, decreased by three times in comparison with the same period of the last year.

The report says that during this period a number of livestock products increased by 3.1 percent, while crop production decreased by 8.1 percent.

On November 1, 2014 in Azerbaijan, 2, 178,800 tons of grain were harvested (2,361,800 tons of maize) from an area of 954,800 hectares. Whereas, a year earlier 2,753,000 tonnes were collected from an area of 1,034,700 hectares. The harvested area of cereals and legumes totaled 989,800 hectares (98.9 percent of total sown area), tobacco – 1,1000 hectares, cotton – 22,900 hectares, potatoes – 61,700 hectares, vegetables – 75,700 hectares (99.6 percent), melons – 28,000 hectares, as well as feed sunflower – 11,700 hectares.

During this period, the country produced 378,300 tons of meat, 1,566,100 tons of milk, 1,299,400 tons of eggs and 16,500 tons of wool.