Minister of agriculture promises to reanimate program of agricultural insurance in Armenia

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.