January 15 2008, 09:34

Cabinet of Ministers of Ukraine will allocate UAH 200 mln. for agricultural insurance

More than UAH 24 billion ($4.8 billion) of state budget 2008 will be allocated for the support of agri-industrial complex and rural area revival (more than UAH 8 billion ($1.6 billion) was allocated in 2007).

There is a plan to spend UAH 200 mln. ($ 40 mln.) of this sum for the compensation of the insurance payments done by those agricultural producers who insured the plantings. Such donation is provided by the Law "About state support of agriculture". The state reimburses 50% of the insurance payments for the agricultural producers who insured the plantings. The insurance let them claim for the other bonuses too.

Despite of the enumerated advantages and frequent weather disasters, agricultural producers do not hurry to insure the cultivation areas, RBK-Ukraine informs. In 2005 insurance officers insured 2% of planted cultivation areas; in 2006 - a little bit more than 3.4%, and in 2007 - around 5%.

Yaroslav Kardash, the President of the Association of Farmers and Private Land Owners, explains this situation by the absence of insurance companies able to introduce favorable insurance conditions for the farmers. "Agricultural producers deeply mistrust the insurance agents. Many insurance companies are ready to insure agricultural producers, although they are unable to provide a feasible mechanism both of the insurance process and the payments in case of loss occurrence", he thinks.

On the other hand, the farmers fail to insure the future harvest because of the absence of free operational assets. "Few agricultural producers can afford buying insurance in Ukraine. In most cases, the companies with foreign investments or large national agri-holdings are insured", Mr. Kardash tells.

To the opinion of insurance agents, the problem of agricultural insurance is the implementation of the rules stipulated by the Law. "The Law about the state support provided to agriculture does not work to the fullest extent. In many cases the support has no relation to the actual insurance and its terms. The state support of the agricultural producers should be reduced in order to stimulate the insurance process. But, the insurance agents should provide their clients with quality insurance product too", Elena Masharo, Deputy General Director of "Aska" insurance company thinks.

At the same time, the insurance agents point out that the agricultural producers are better stimulated by the already received payments of the insurance companies, but not the state donations. "Agricultural insurance was not obligatory in the previous years, because it was anticipated as the additional load on the agricultural activities; so, everyone got donations. Such situation affected the market of agricultural insurance much. But today, taking into account the past year summer drought and present-day frosts, the agricultural producers are sure to feel the feasibility of agricultural insurance", Vyacheslav Grabyna, the Director of the Department of Insurance Methodology and Underwriting, "Oranta" insurance company, observes.

"The draft Law "About the insurance of agricultural risks" has been prepared; it stipulates the creation of the agency for agricultural risks insurance, records of united statistics and introduction of the equal tariff rates. Of course, the allocated funds of the state budget are not enough, if we recollect that agricultural sector producers 10% of GDP. However, this sum is mush greater than in the previous years, so it may really stimulate the agricultural insurance", Alexander Filonyuk, the President of Insurance Organizations League told.

By the way, the funds allocated by the budget are not necessarily adopted. Only around UAH 10 mln. out of the allocated UAH 54 mln. were adopted in 2005. The same situation took place past year. Mrs. Oxana Prudka, the Deputy Chief of Loaning and Insurance Department, the Ministry of Agricultural Policy, informed that UAH 2 mln. of budget funds were not adopted in 2007.

The Ministry thinks, the allocated UAH 200 mln. will not be enough for all the agricultural producers to get donations. "Right now we have spelled out the regulation to primarily grant those enterprises the donations who have been insured", Mrs. Prudka tells. If the dreams of the officials come true, the agricultural insurance payments will increase 35-50% in 2008.