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Baku, 2013

New Model of Agricultural Insurance in Russia. Korney Bizhdov NAAI President. Baku, 2013. Agricultural Insurance Development and State Support of Agriculture. Now we are at the initial stage of developing a state-suppo r ted system of agricultural insurance in Russia . 2.

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Baku, 2013

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  1. NewModelofAgriculturalInsuranceinRussia KorneyBizhdov NAAI President Baku, 2013

  2. AgriculturalInsuranceDevelopmentandStateSupportofAgriculture Nowweareattheinitialstageofdeveloping a state-supportedsystemofagriculturalinsurance in Russia. 2

  3. NewSystemofState-SupportedAgriculturalInsurance FEDERAL BUDGET, in accordance with the Agricultural Insurance Plan* AGRICULTURAL PRODUCER BUDGETS OF FEDERAL SUBJECTS 50% 50% INSURER *TheAgriculturalInsurancePlanisdevisedeachyearbasedonproposalsfromfederalsubjectsandinsurers' association. Itliststheinsuredobjectsandsetsratelimitsforsubsidycalculation 3

  4. State-SupportedAgriculturalInsurancesince 01.01.2012 MINISTRY OF AGRICULTURE Reportonbudgetexpenses Proposals to the Agricultural Insurance Plan Federalsubsidies Regional governingbodyforagricultureindustry National Association of Agricultural Insurers Compensation Payment Fund Contributionsfrominsurancepremiums Insurers Independentexpertiseincaseofparties' dispute. RegulatedbytheGovernmentoftheRussianFederation Application for subsidy and documents reflecting insurance terms 50% of insurance premiums Agricultural producers 4

  5. Riskoflossordamagetocropandperennialplantations, covered by state-supported insurance FederalLawNo 260-FZ: insuranceisprovidedagainsttheriskoflossordestructionofcropand perennial plantings. Croplossordestructionistherealcropyieldsfalling 30% ormorebelowtheplannedlevel. INSURED EVENT INSURED EVENT 5

  6. ThelistofnaturalperilstoagriculturalproductionhasbeenextendedThelistofnaturalperilstoagriculturalproductionhasbeenextended 1.Atmospheric drought 2.Soil drought3. Dryhotwind 4.Freezing 5.Winter-killing 6.Damping-off 7.Hailstorm 8.Dust storm9.Sleet 10.Flooding 11.Waterlogging 12.Strong wind13.Windstorm 14.Earthquake 15.Avalanche 16.Mudslide 17.Wildfire 18. Epifitoty 6

  7. 2013 seeslaunchofinsuranceagainsttheriskoflossordamagetolivestockofthefollowingtypes: Type of livestock 1. Cattle 2. Sheepandgoats 3. Swine 4. Fowl Insuredrisks 1.Infectious diseases(aslistedbytheMinistryofAgriculture) 2.Mass poisoning 3.Natural disasters(lightning, earthquake, duststorm, stormwind, blizzard, snow-storm, flood, downfall, avalanche, mudstorm, landslide) 4.Failure ofpower, heatorwatersupplycausedbynaturaldisasters 5.Fire 7

  8. Insurance Premium Structure Suminsuredisnolessthan 80% oftheinsurablevalue Insurance premium structure 8

  9. Benefits of Federal Law On State Support of Agricultural Insurance • Possibilityofsettingunifiedinsurancestandards(insurancerules, losssettlementprocedure, unifiedstatistics) • 2. Reducingfarmers' financialburden • 3. Cuttingbudgetexpensesincasesofaccidents (exclusionofdirectstatecompensationfor a loss) • 4. Compensationpaymentisguaranteedeveniftheinsurergoesbankrupt 9

  10. State-Supported Insurance Coverage of Croplands: Dynamics Introductionofthelawonstatesupporthashaltedthedegradationoftheagriculturalinsurancesystem. 10

  11. AgriculturalInsuranceMarket in 2012 Market volume, RUR bln. Adoption of the new law and the 2010 drought's effects have stimulated growth of agricultural insurance. 11

  12. Development of the Agricultural Insurance Market • AgriculturalInsuranceMarketin 2012: $432mln.80.4% ofthemarketwasrepresentedbystate-supportedinsurance (accordingtotheFederalFinancialMarketsService). 12

  13. CurrentDevelopmentTrendsinAgriculturalInsurance: 2012 – 2013 • 1. Clientbaseregroupingas a resultoftheirmoreexactingrequirementsfortheinsuranceservice. • 2. Clientbaseextensionbyvirtueofsmallandmid-sizedfarms (mandatoryinsurancein a numberofregions). • 3. Decreasingcostofinsurance. 13

  14. Aspect: Deductible • Thelawprovidesfortwotypesofdeductible: unconditional (deductibleproper) andconditional (franchise). Maximal level of insurance payment for damaged crops depends on unconditional deductible option: 14

  15. Aspect: PopularityoftheDeductible 45%ofinsured agriculturalproducersoptedforcropinsuranceplanswiththedeductibleclause. Themostpopulararetheminiumandthemaximumdeductible levels. 15

  16. National Association of Agricultural Insurers «TheUnifiedAssociationofAgricultureIndustryInsurers – NationalAssociationofAgriculturalInsurers» (NAAI) is a professionalassociationofinsurersprovidingstate-supportedagriculturalprotection. The NAAI emergedin 2007 withtheactivesupportfromtheMinistryofAgriculture, MinistryofFinance, FederalServiceforInsuranceSupervision, andAll-RussianInsuranceAssociation. The NAAI has brought together 27 major Russian federal and regional insurers, with the total authorised capital of 75 bln roubles and many of them top-ratedby the national rating agency. 16

  17. NAAI's Chief Functions NAAI's Chief Functions Compensation payments Rulemaking Supervision Statistics Standardization Information Organization The NAAI guaranteestofarmers: • Solvencyofthesystemifoneofitsmembersgoesbankrupt. • Jointeffortsinprovidingtimelyandadequateinsurancepayments. • Consultingassistance. The NAAI offersitsmembercompanies: • Coordinationofagriculturalinsurersandprotectionoftheirinterests. • Implementationofnewunifiedinsurancestadards. 17

  18. NAAI'sShareinState-SupportedAgriculturalInsuranceMarket,2010-2011 and2012 2010 NAAI's 2012 share growth against 2011 - about 20%. 2011 2012 NAAI Other insurers In 2012, NAAI membersprovidedstate-supportedinsuranceto8.4 mlnha crop lands, amountingto62%ofthemarket. * - based on data from Federal Agency for State Support to Agricultural Insurance 18 ** - by the insured croplands

  19. NAAI: Crops Coverage Dynamics State-Supported Agricultural Insurance: NAAI Portfolio Dynamics NAAI developmentin 1H 2013 (asof 01.05.2013, againstJan-May 2012): numberoffarmsinsured: +83% numberofpolicies: +68% 19

  20. StatisticsonState-SupportedAgriculturalInsurancePolicies, 2012 In 2012 NAAI membersprovidedinsuranceto3.3 thsfarmsandconcluded4.0 thspolicies, withthetotalsuminsuredof$5,9 bln.

  21. State-supported insurance: costs for farmers Average price of state-supported crop insurance policy (NAAI members), $/ 1 ha On the average, a farmer paid $11,6 per ha in 2012 (50% of insurance premium)

  22. NAAI Members' LossSettlementunder 2012 Policies Losssettlementunder 2012 policiesisnotyetcompleted. The NAAI expectstheultimate 2012 lossestopremiumsratiotoreachorexceed 50%. ? * * - 2009-2011 figuresbasedondatafromFederalAgencyforStateSupporttoAgriculturalInsurance; ** - dataforthe 2012 lossestopremiumsratio (asof 01.05.2013). 22

  23. NAAI Members' LossSettlementunder 2012 Policies 2012: 157farms 505 lossestotaling$65mln. claimed. Asof01.05.2013 74%oflosseshavebeensettled. 23

  24. NAAI Members' LossSettlementunder 2012 Policies: causes of insurance payment refusals

  25. State-Supported Agricultural Insurance Practices: Main Problems and Possible Solutions 25

  26. State-Supported Agricultural Insurance Practices: Main Problems and Possible Solutions 26

  27. Strategic Guidelines of Agricultural Insurance Development • 1. Improvementofthecurrentsystemofcomprehensiveagriculturalinsurancebasedonconclusionsdrawnfrominsurancepractice. • 2. Designof a variablesystemofagriculturalinsurancereflectingtheinternationalpracticebasedonweatherandcropyieldindices. • 3. Voluntaryinsuranceofagriculturalrisks, yetmandatoryinsuranceforotherstate-subsidizedprograms. • 4. Tougherrequirementsbystateauthoritiesandinsurersforcompliancewithagronomicstandards. • 5. Transitionto a simpleandcommonlyunderstandableregulatoryframework. 27

  28. *** At first, there was a lightning in the sky; Then, the fire in the ashes on the ground has died; For all the times, there should be the Heaven That for the World its sorrow fate decides. MirzaShafiVazeh *** Cпервана небе молния во мгле, Потом огонь, потом — земля в золе. И так оно всегда: по воле неба Все беды, все печали на земле. Мирза ШафиВазех

  29. Diqqətinizəgörətəşəkküredirik! Thank you for your attention! www.naai.ru

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