Alexander Saus  

6 Ways to Boost Insurance of Ukraine's Agriculture

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Given the share of land suitable for agriculture in Ukraine accounting for almost 70 % of land area, it is safe to assume that this asset should be main priority in terms of governmental protection and regulation as stability in the field of agriculture is an integral part of the stable development of national economy as a whole. Insurance is of great importance in this matter. However, currently our country faces the situation when hardly 4 % of overall land under crops falls within insurance coverage. It is worth mentioning that distinctive agricultural insurance feature  is reflected by high risk-high cost relationship.  Moreover, the culture of insurance leaves much to be desired.

Of course, there are a lot of factors explaining such poor state of affairs.  Insufficient legislation, lack of finance, inadequate insurance products, low level of competence are only a few of them.  Besides, out of nearly 400 of insurance companies only 13-15 actually offer services to companies operating in the sphere of agriculture in Ukraine. Another aspect of this matter lies in the fact that the lion’s share of all the policies concluded each year is absorbed by the ones covering only standard risks necessary to satisfy the requirements of lending institution whereas the actual loss of crop or cattle remains uncovered.

The good news is that there are measures capable of facilitating the change in the insurance shield of agriculture in Ukraine for the better. They are as follows:

  1. Adopting specific legislation that would regulate the sphere of competence division between all interested parties, the correspondence of rules with the main provisions of the international trade agreements as well as adequate and fair allocation of the state subsidies.
  2. Harmonizing standards of operation, i.e. drafting the unified designs of insurance products in terms of insurance policies’ wordings, underwriting, base line actuarial rates, claims settlement procedures, data collection methodology etc.
  3. Diversifying insurance products to fully cover the essential risks associated with different kinds of crops and species of live stock to ensure the minimal losses of crops and profit for the insured.
  4. Regulating the mandatory re-insurance of catastrophic risks associated with weather patterns.
  5. Maintain functional and competent body managing the relations between the Government, the Insured and the Insurers, which would unite independent experts able to resolve disputed issues between the parties in the field of Ukraine’s agriculture.
  6. Maintaining the high level of knowledge and skills in terms of experts in the agricultural insurance on all levels along with effective mechanism of training, certification, monitoring on all stages of their career development.

Luckily, for the last decade the above mentioned problem has been under close consideration by Ukraine’s agricultural companies, governmental bodies and insurance companies.

Several steps already taken on the national level must be named.  On Peculiarities of Agricultural Products Insurance with the State Support Act of Ukraine was adopted in 2012 with the purpose to gain two objectives. The first one is to regulate the relations in the field of agricultural insurance carried out with state support in order to ensure stability and sustainable development of this sphere of economy. The second one is to provide indirect incentive to expand the use of variety of insurance agreements for winter crop insurance, crop-yield insurance, cattle insurance etc. as it is stipulated in the Act that the governmental subsidies be allocated only upon condition that the insurance agreement with state support is concluded. Besides, the Act presented three innovations to the legislation such as official adoption of standard insurance products, implementation of the mechanism for subsidized agricultural insurance and establishment of Ukraine’s Agriculture Insurance Pool.

Unfortunately the abovementioned innovations have not proved to be working effectively as of yet, so hopefully soon the new regulations will be drafted and come into force to reach the insurance development level  of agriculture similar to Europe’s  in Ukraine.


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