National Association of Agriculture Insurers

Korney Bizhdov, President of NAAI: the volume of the agricultural insurance market in 2019 exceeded 5.3 billion roubles

According to the National Association of Agriculture Insurers, the volume of the Russian agricultural risks insurance market, as of 31st December, 2019, reached 5.3 billion roubles. The data includes insurance premiums with state support in the amount of 4.3 billion roubles, as well as insurance premiums for agricultural contracts concluded without subsidies in the first 9 months of 2019 in the amount of 983 million roubles.

In total, according to NAAI, 4.8 million hectares of crop sowing and planting area and 6.7 million head of livestock were insured under state support in Russia. Compared with the same indicators in 2018 – 1.2 million hectares and 4.5 million conditional head – this represents increases of 315% and 49%, respectively.

“In 2019, the agricultural insurance market with state support showed an increase in insurance premiums by 2.3-fold, from 1.89 billion roubles to 4.33 billion roubles. Amendments to the relevant legislation that came into force, together with measures of the Ministry of Agriculture of Russia and the insurance community, contributed to this”, commented the President of NAAI, Korney Bizhdov. “A survey of NAAI members at the end of the year showed that demand for insurance protection under state support continues to grow in the regions. Estimation of potential demand already significantly exceeds the market volume achieved during the year.” At the same time, the development of agricultural insurance in Russia is still insufficient to fully protect the agricultural sector from the risks of emergency disasters, said the President of NAAI. According to official data in 2019, the losses of agrarians in 25 constituent entities of the Russian Federation where a state of emergency was announced in connection to natural disasters, reached 12.7 billion roubles. “According to NAAI, the losses of agrarians last year exceed this threshold,” noted Korney Bizhdov. NAAI also receives information about large payments to farms for crop losses from regions where a state of emergency was not announced. Thus, the company “RSHB-Insurance” in January announced the payment of 95.7 million roubles to two agricultural holdings in the Samara region: respectively 63 million roubles and 32.7 million roubles for the dead winter wheat crop. Another example of a region where a number of farms have lost crops due to adverse weather conditions is the Stavropol Territory, where the company “Rosgosstrakh” has already paid 25.8 million roubles for the loss of the winter wheat crop, and another loss accepted for settlement in the amount of 63 million roubles was declared by the company “Soglasie”.

According to NAAI, the largest payment in crop insurance over the past two years was made by “RSHB-Insurance”, This was paid in January 2020 for losses of agrarians in Mordovia of 73.8 million roubles. A risk to extensive crops wintering resulted in the announcement of a state of emergency in the republic during the past agricultural season.

In general, payments statistics for 2019 are still at the final stage of formation, emphasized the President of NAAI, Korney Bizhdov. He recalled that an absolute record for agricultural risk insurance payments was achieved last year, when “Alfa Insurance” paid 570 million roubles for one event – an outbreak of swine foot-and-mouth disease in the Primorsky Territory.

The question of improving the efficiency of the agricultural insurance system and increasing coverage up to 40-45% of the sown area was raised on November 23rd, 2019 at a meeting with the Russian President Vladimir Putin and the Deputy Prime Minister of the Russian Government, Alexei Gordeev. “NAAI believes that, in order to maximize the protection of agrarians from emergencies, it is necessary to supplement the agricultural insurance system with new programs – in particular, insurance of farmers’ costs to cultivate crops in dead fields.”

Perhaps it makes sense to diversify according to “winter” and “summer” risks for more effective insurance protection of winter crops. Such a program would be convenient for both agrarians and insurers in regions with increased agricultural risks and would reduce the costs of both the farms and the subsidizing budget. This issue requires a change in the regulatory framework for agricultural insurance with state support, at least in methods for assessing insured values and losses, which are approved by orders of the Russian Ministry of Agriculture. “It may also be necessary to adjust the Law on Agricultural Insurance with state support” said Korney Bizhdov, President of NAAI.

According to Federal Law N 260-FZ “On State Support in the Field of Agricultural Insurance”, within the framework of a centralized system, state support is provided for insurance of crop production, animal husbandry and commercial aquaculture risks. Since January 1st, 2016, a single all-Russian association has been operating in the agricultural insurance market with state support: the National Association of Agriculture Insurers.
In 2018, the Law “On State Support in the Field of Agricultural Insurance ...” N 260-FZ was amended, with the purpose of creating agricultural insurance conditions that are both more flexible and more diverse. The law entered into force on March 1st, 2019.