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Agriculture insurance being developed in Azerbaijan

2 July 2015 12:09 (UTC+04:00)
Agriculture insurance being developed in Azerbaijan

By Gulgiz Dadashova

Azerbaijan seeks to attract international experts in the development of the law on agricultural insurance.

Finance Minister Samir Sharifov made the remark during the VI Azerbaijan International Insurance Forum in Baku on July 2.

“Azerbaijan is interested in developing robust agricultural insurance policies, which could provide a further development of agrarian industry and provide support to farmers," he said.

This type of insurance is characterized by high risk, the minister said, adding that however, the government will play a leading role in the development of agricultural insurance in the country

“We have already begun to draft a bill on the state support of agricultural insurance in cooperation with the Agriculture Ministry. Following its approval at the government, it will be submitted for discussion to the parliament,” Sharifov said.

Currently, the government provides subsidies for agricultural insurance, but their coverage is very small.

The share of public financing in the agricultural insurance premium was increased from 25 to 50 percent according to the amendments to the law on the assistance and development of agriculture in Azerbaijan as approved in summer 2007.

Besides wheat, barley, maize, sunflower, potato, sugar beet and vegetables were included to the list of agricultural crops, insured by the funds of the state budget.

The average tariff on agricultural insurance in Azerbaijan amounts to around 1,500 ($1,428) manats per year (five percent per hectare), while the average profit per hectare is about 25,000 manats ($23,801) per year.

Each year Azerbaijan's officials in charge of the state budget determine the funds in view of covering 50-percent of the cost of all insurance contracts with farmers. Unfortunately, it is almost never used to its full capacity.

Experts believe one of the causes of underdevelopment of agricultural insurance in Azerbaijan is the lack of awareness of farmers on insurance and on their capacities.

According to the State Insurance Supervision Service under the Finance Ministry, in January-May 2015 charges on insurance of agricultural products of plant origin totaled 204.23 manat ($194,438) with payments at 61,270 manat ($58,332), insurance of animals - 1.2 million manat ($1,142 million ) with payments of 115,300 manats ($109,772). The share of agricultural insurance in the total amount of fees is 0.65 percent, payments - 0.24 percent.

The potential of the Azerbaijani agricultural insurance market is estimated at 100 million manats (about $127 million). The market could grow by at least 20-30 percent, as a new field of activity will emerge after the new law on Insurance of agriculture is passed.

This year has been declared a "Year of Agriculture". Growth in agriculture constitutes more than 3 per cent in the first three month of 2015.

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Follow Gulgiz Dadashova on Twitter: @GulgizD

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