ArmInfo. A pilot program of agricultural insurance will be implemented in one of the Armenian communities, Minister of Agriculture of Armenia Ignaty Arakelyan told reporters on September 29.
In his words, the agricultural sector is the most risky one. If he pilot program is a success, we will find solutions to all problems of farmers connected with the activity of anti-hail stations, pests and others, Arakelyan said.
In response to ArmInfo's question concerning the prospects of introducing agricultural insurance in Armenia, the minister said it is necessary to wait for the results of the pilot program to be implemented in specific community and not in the entire industry as it was planned before. He could not say however when specifically the program will be implemented, as the talks with international organizations for financing of the program are still underway.
Earlier in May 2011, then prime minister Tigran Sargsyan said introduction of agricultural insurance is inexpedient in Armenia, as the sector comprises just small farms, while farmers will hardly make insurance payments. Nevertheless, KfW Bank allocated 400,000 EUR this year for development of a concept of agricultural insurance for Armenia and Georgia.
Yet in late 2014, Minister of Agriculture Sergo Karapetyan said at a final press conference of the Ministry that in 2015 together with INGO Armenia the Ministry planned to implement a pilot program of cattle insurance in Vayots Dzor region. Where the inventory of the cattle was over. He said no other insurance company agreed to undertake such risks.
Meantime, INGO Armenia executive officer is not pleased with the results of the activity of the joint working group. He said the working group was set up in 2013. It comprised one employee of INGO Armenia and 3 employees of the Ministry of Agriculture. The risks were assessed. That was all the group did. "Agricultural sector, especially the one in Armenia, suffers high losses due to several factors. The first is concentration of all risks on the not-large territory. Second is the risk of nearly all types of natural calamities - floods, freezing, hails, and landslides. Agriculture insurance in such case must be semi- compulsory so that at least 30%-50% of farms are insured. Otherwise, it is unreasonable to insure the sector," Altunyan explained. German KfW Bank once expressed an interest in such insurance product, but the company lost its interest in the agricultural sector and the group was dissolved 5-6 months ago. The insurer promised to return to this issue when "an element of commerce emerges in the given sector and the insurance of the agricultural sectors becomes economically substantiated. Otherwise, the scientific research institutions should study the sector," he said.
Hrachya Tspnetsyan, the Head of the Department for Agrarian Development Programs, Ministry of Agriculture, in turn, told ArmInfo "a great work has been carried out:" Possible risks were assessed, the insurance premium was determined, 55%-70% of which will be paid by the government or donor organizations, with the remaining will be paid by farms. "The next step is the implementation of the pilot program, which requires 25-35 million drams, but we have no such money yet," he said. As regards the legislative base of introducing agriculture insurance in Armenia, Tspnetsyan said, the work was based on the Law On Insurance and Insurance Activity and on the programs under the Strategy of Sustainable Development of Rural Communities and Farms for 2015-2025. No conception has been approved yet, though the German bank provided the funds for development of this document. As the executive director of the only insurance companies involved in the project said: "It is very likely that consultants received their salaries, and there the matter dropped."
The current system of insurance legislation of Armenia enables introducing the following agricultural insurance lines: insurance of harvest, animals, industrial buildings and premises that are part of the property insurance (Article 7.2.8 and 7.2.9 of the RA Law On Insurance and Insurance Activity). At present, the operating insurance companies have licenses for property insurance, but no company provides agricultural insurance.