Government is ready to share risks with agricultural insurers

ArmInfo.As part of a pilot program to introduce an agricultural insurance system, the Armenian government will not only subsidize insurance premiums, but will also compensate the costs of insurance companies if a certain threshold of insurance payments is exceeded.

 As Minister of Economy Gevorg  Papoyan stated at a government meeting on April 12, presenting the  corresponding draft decision, the adoption of the project is due to  the need to ensure the implementation of the pilot program for the  2024 agricultural year. He recalled that under the program in 2023,  apricots, grapes, peaches, plums, apples, cherries, cherries,  watermelons, melons, potatoes, crops of autumn/spring wheat, barley  and oats are insured. The insured risks were: spring frosts, drought,  hail and fire.  "For the 2023 agricultural year, 11,662 hectares of  land were insured, the insurance premium amounted to about 1.8  billion drams (the total volume of compensation was 2.7 billion  drams), as of December 31, about 3,864 insurance compensations were  paid for about 2.7 billion drams.

In 2024, due to the withdrawal of the reinsurance company from the RA  agricultural insurance market, insurance companies were unable to  take on insurance risks in full, given the high losses caused by  climate change. For this reason, the program started late in this  year, and therefore it was necessary to find a temporary solution for  2024 and change the approach of the program," Papoyan said.  The  minister noted that to ensure the participation of insurance  companies in the program, it is proposed this year that, in addition  to subsidizing insurance premiums, the government is ready to  partially take on the insurance risk, that is, to support insurance  companies by providing compensation if a certain threshold of  insurance payments is exceeded.

"In particular, it is planned to compensate each insurance company  that is a member of the agency with 80 percent of the insurance  benefits compensated to the entrepreneurs exceeding 70 percent of the  sum of the insurance premiums collected by the insurance company,"  explained the head of the Ministry of Economy.

According to Papoyan, in 2024 the government will support the  operating and other expenses of the National Insurers Agency through  agricultural insurance.

"Based on crop insurance terms according to crops and risks, we plan  that this year we will be able to insure peaches, plums, apples,  cherries, cherries, watermelons, melons, potatoes against the risk of  hail, and grain crops wheat, barley and oats against the risk of  drought." said Gevorg Papoyan. The minister presented the changes  made to the list: cereal crops will not be insured against hail this  year, but will be insured against drought, and, for example, apples,  cherries, cherries will not be insured against spring frost.  The  agro-risk insurance program started in Armenia in September 2019 and  continued to operate until 2023, in fact, in pilot mode, covering six  regions of the country. The sale of insurance policies began at the  beginning of 2020. The purchase of an insurance policy is subsidized  by the state in the amount of 50-60%, depending on the natural risk,  and there is a 10% discount in case of full insurance. The reinsurer  was the large Swiss company Swiss Re. Also the Agricultural Insurance  National Agency (AINA) has been established, which was entrusted with  the development of standard agricultural insurance products,  conditions and regulation of the state subsidization process,  actuarial calculations and other functions.