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Agricultural Insurance Markets in CIS:

Overview of the CIS ag insurance markets current situation and prospects.
by

Yan Shynkarenko

on 22 August 2015

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Transcript of Agricultural Insurance Markets in CIS:

Agricultural Insurance Markets in CIS:
Market dynamics, 2015 prospective.

Ian Shynkarenko, CEO, AgroInsurance International

October 6, 2014
Istanbul, Turkey

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WORLD DATA IN FOCUS:
By 2040:
2 degrees celcius hotter
By 2040:

World's population will
exceed 9 billion people
2 DEGREES HOTTER:

20-30% - LESS RAINS
DROUGHTS
CROP FAILURES
HURRICANES
CROP LAND SHRINK

FOOD PRODUCTION PER
PERSON WILL DECREASE 15% BY 2040
* World Bank data
Wheat production (FAO 2012) :
Wheat production (2013/2014) :
Corn production (FAO 2012) :
Corn export (2014 estimations) :
Sunflower seeds production (FAO 2012) :
General overview on CIS countries Ag Insurance:
In CIS region agricultural insurance was re-launched in 2004-2006 (Russia, Ukraine, Moldova, Belorussia)

MPCI programs dominate on the regional markets

Named-peril programs (hail, fire) are mostly used for bankassurance to reduce costs for loan-takers

High percentage of formal insurance

Lack of cooperation between governments and insurers although subsidy programs are in place

Private insurance companies are main providers

Conservative market development dynamics
High level of price competition in commercial sector (low premium rates, eg. 0,87%-2,43% for wheat, MPCI)

Low volumes of livestock insurance though good quality comprehensive coverage is available (low demand)

Fruits and vegetables are mostly not insured (exception Moldova)

Limited use of innovations (GPS, satellites, tablet PC)

Lack of underwriters and loss adjusters

High cost of data (weather and yields)
General overview on CIS countries Ag Insurance:
ываваьт
CLOSE LOOK 0N
EASTERN EUROPE & CAUCASUS

AGRICULTURAL INSURANCE
KEY CROPS IN RUSSIA:
KEY
RISKS
IN RUSSIA:
WHEAT
SUNFLOWER
CORN
DROUGHT
WINTERKILL
EXCESSIVE MOISTURE
Law on State Support of Agricultural Insurance was adopted in 2012.

Subsidy program is administered by the Federal Agency on ag insurance

50% of premium is subsidized by the federal and regional governments

Both crops and livestock can be insured (MPCI and MPLI programs)

Ag insurance provided through two organizations – Agropromstrakh and National Union of Agricultural Insurers – about 60 providers active at the market

In 2014 initiated decrease in deductible for state subsidized insurance program 30% -> 25%

In 2014 a creation of one unified agricultural insurance professional organization has been initiated
KEY MARKET INDICATORS IN RUSSIA:
UKRAINE
KEY CROPS IN UKRAINE:
WHEAT
SUNFLOWER
CORN
RAPE SEED
KEY
RISKS
IN UKRAINE:
DROUGHT
WINTERKILL
EXCESSIVE MOISTURE
HAIL
KEY MARKET INDICATORS IN UKRAINE:
Agricultural insurance was subsidized in 2005-2008 (50%), stopped for budget constraints. A law of subsidized agricultural insurance was adopted in 2012 but the government did not provided funds for subsidies

26 insurance companies have license to operate at the ag insurance market but only about 10 are constantly present

MPCI, named-peril, area yield index, winterkill programs are offered

Loss adjusters certification program launched in 2012 and 2014, 32 experts certified in 2012. 15 new certified experts will enter the market in October 2014

Standard procedures are adopted (unified underwriting and loss adjustment)

In 2013 ag insurance market indicated 16,5 million USD of premiums collected, loss ratio – less than 10%. About 5% of total ag area is insured. 84% of total crop insurance market in 2013-2014 was driven by state commodity purchase programs

Agricultural Insurance Pool (4 companies) administered 84% of ag insurance in Ukraine in 2012 - 2013. Current political changes in Ukraine shrink Pool's activity to less than 5% out of total market share for 2014-2015
CROP PRODUCTION & EXPORT DATA:
EASTERN EUROPEAN STATES
PLAY VITAL ROLE
IN GLOBAL AGRICULTURAL PRODUCTION AND COMMODITIES SUPPLY
RISK MITIGATION IN AGRICULTURE -
PRIORITY #1
KAZAKHSTAN
KEY CROPS IN KAZAKHSTAN:
WHEAT
SUNFLOWER
RAPE SEED
COTTON
KEY
RISKS
IN KAZAKHSTAN:
DROUGHT
WINTERKILL
Kazakhstan grain production suffers from serious drought
two out of every five crop seasons *
* USDA FAS Commodity Intelligence Report
KEY MARKET INDICATORS IN KAZAKHSTAN:
The Law on mandatory crop insurance was adopted in 2004, amended in 2011. 50% of payouts subsidized by state

MPCI coverage for grains, oilseeds, sugar beet and cotton

Vivid example when over-regulation ruins the program (assigned cost of production, expected income, set premium rates, etc.)

3 private insurance companies and 39 mutuals participated in the program but private insurers start to pull out

Farmers are fined for not purchasing crop insurance, main reason for formal insurance

The least effective program in CIS region, so far
CAUCASUS:
GEORGIA, ARMENIA, AZERBAIJAN
KEY CROPS IN GEORGIA, ARMENIA, AZERBAIJAN:
GRAPES
VEGETABLES
CEREALS
KEY
RISKS
IN GEORGIA, ARMENIA, AZERBAIJAN:
FRUITS
HAIL
DROUGHT
SPRING FROST
FIRE
KEY MARKET INDICATORS FOR CAUCASUS:
Armenia and Azerbaijan
– currently no agricultural insurance but governments started to think about it

Georgia:
- Programs were launched in 2011, about 2300 policies in 2012
- Named-peril platform prevails
- Market volume is small, about 350 thousand USD premiums in 2012

International Donors
activity in risk mitigation -
Georgia and Armenia are in focus

Azerbaijan
- stand-by due to State considerations and donors support
`
IN FOCUS:
CHALLENGES & PROSPECTS
FOR CIS COUNTRIES FOR 2015
PPP programs development
Farmer-friendly
insurance programs
Standardizing key procedures (underwriting, survey & loss adjustment)
Recognizing possible CAT losses (2010 –Russia; 2012 - Kazakhstan, 2003, 2007 – Ukraine, 2012 - Moldova)
Insurance linked with government support can result in rapid development and higher volumes of insurance
Government officials need to be educated
15-20% growth potential per annum in Russia, Ukraine, Kazakhstan & Caucasus
Insurance program results planning horizon - not less than 3-5 years, practically
THANK YOU FOR ATTENTION!
YAN SHYNKARENKO
AGROINSURANCE INTERNATIONAL
yshynkarenko@agroinsurance.com
+380 50 418 2035
+380 98 539 3335
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