NAAI: 9 month results confirm significant growth in the agricultural insurance market of Russia: market volume by 2.5-fold; insured area more than 5.3-fold“The results of the agricultural insurance system of Russia for the first three quarters have confirmed that the main trend in 2019 continues to be the growth of agricultural insurance coverage and the related growth of the market. The insured area under agricultural crops in the country increased by more than 5-fold, the insured livestock by 39%, and the volume of insurance with state support 2.5-fold,” said Korney Bizhdov, President of the National Association of Agriculture Insurers, in summing up the interim results of agricultural insurance with state support.
The volume of the agricultural insurance market with state support for the first 9 months of 2019 amounted to 2.99 billion roubles, of which 2.0 billion roubles accounts for crop insurance and 952 million roubles, livestock. A year earlier, the 9-month accrued insurance premium for agricultural risks insurance reached 1.17 billion roubles for contracts with state support, 551 million roubles of which accounted for crop insurance and 623 million roubles for livestock insurance. Thus, in general, the volume of subsidized agricultural insurance increased 2.5-fold, while the segment of crop insurance with state support grew by 269% over the year, with livestock insurance growing by 53%.
Crop insurance is developing most dynamically this year. According to NAAI, in January-September 2019, almost 3.3 million hectares of crops were insured under state support. A year earlier, on October 01st, only 625 thousand hectares had insurance coverage (an increase of 428%). “The main driver of growth was the restoration of state support for spring sowing insurance, which occurred this year,” explained the President of NAAI, Korney Bizhdov. “In addition, a significant role was played by the updated legislative framework for agricultural insurance, which allowed farmers to choose more flexible conditions and reduce the cost of insurance policies. At present time, winter crop insurance has begun in some regions, and NAAI expects this campaign to also perform more dynamically than last year.” The President of NAAI recalled that 1.2 million hectares of crop was insured in the Russian Federation throughout 2018.
According to the new conditions effective from the 01st of March, 2019, farmers can choose what crop risks to insure against. In addition, insurance with an deductible is allowed, which can be set at levels from 10% to 50%, and the insurance amount under the contract (liability limit of the insurer) can now be reduced to 70% of the insured crop value. These conditions made it possible to reduce the average insurance rate for crop insurance contracts from 4.19% a year earlier to 2.55%. At the same time, the average sown area per crop insurance contract increased from 2.3 thousand ha to 2.7 thousand hectares.
“According to NAAI, farmers began to actively use new opportunities to reduce the cost of insurance policies. More than 50% of insurance contracts are concluded with partial risks packages,” comments Korney Bizhdov, President of NAAI. This shows how important the cost of insurance is for agricultural producers. On the other hand, this practice raises certain questions as to how adequately farmers assess their needs for specific insurance coverage when concluding a contract. ”
In this regard, the President of NAAI had noted an increase in the importance of insurance consultations for farmers, which can be organized on the basis of regional management bodies of the agricultural organisations or farmer associations. “Today, several regions have expressed their interest in the creation of such consulting platforms,” said Korney Bizhdov.
Livestock insured under state support conditions reached 4.2 million conventional head, up from 3.0 million a year earlier. The increase in coverage by 39% and in insurance premiums by 53% occurred while maintaining almost the same cost of insurance in this segment: the average insurance rate increased slightly from 1.04% a year earlier to 1.11%. At the same time, the average insurance premium per contract increased from 2.9 million roubles a year earlier, up to 4.3 million roubles. “For several years now, NAAI observed the following trend: a group of large enterprises had been formed in the livestock industry, each year gaining more and more insurance coverage and serving as a factor of market growth. At the same time, new farms are gradually becoming involved in the agricultural insurance system. The main impetus for this is epizootics, the risk of which today poses the main threat to livestock,” said the President of NAAI, Korney Bizhdov. “According to NAAI, for further active development of livestock insurance, a change in veterinary rules is necessary, proposals for which the NAAI has already sent to the Ministry of Agriculture of Russia.”
“At the same time, preliminary information also indicates an increase in declared losses compared to last year. This is due primarily to market growth and, secondly, to an increase in the frequency and scale of adverse natural phenomena that affected agriculture this year,” said the President of NAAI. It should be noted that for the first 6 months of 2019, insurers paid 1.22 billion roubles of insurance indemnity to farmers under agricultural risk insurance contracts, which is almost equal to claims paid in the whole year of 2018 - 1.56 billion roubles."
According to Federal Law No. 260-FZ. “On State Support in the Field of Agricultural Insurance…”, state support is provided in the Russian Federation for insurance of crop production, livestock and commercial aquaculture risks. Tte National Association of Agriculture Insurers is all-Russian association in the agricultural insurance market with state support.
In 2018, the Law “On State Support in the Field of Agricultural Insurance ...” No. 260-FZ was amended, with the purpose of increasing the flexibility and diversity of agricultural insurance conditions. The Law changes came into effect on 01st March, 2019.