KAZAKHSTAN: agroinsurance goes from compulsory to voluntary

The agroinsurance system of Kazakhstan will undergo a radical change - transition from compulsory to voluntary, and from subsidized indemnities to subsidized premiums, Allinsurance.kz reports with a reference to the Ministry of Agriculture.

According to Kazakhstan's Minister of Agriculture, the acting insurance mechanism does not provide an adequate level of risk management in the industry. Crop insurance does not cover even half (43% in 2018). 70% of insurance coverage comes from mutual insurance associations. The lack of proper control over these leads to violation of the law in terms of tariffs, collecting premiums and indemnity payments. Thus, it was decided to transform the insurance into voluntary.

The Ministry believes that the transition from subsidizing indemnities to subsidizing premiums will increase the availability of agroindustry insurance, since insurance policies may secure loans. But, for the time, insurance companies are not interested in agroinsurance, Kapital.kz reports.

The lack of insurer interest, experts explain, is caused by the impossibility in determining risks of livestock production. On the other hand, entrepreneurs can't provide sufficient export volumes and protect themselves against natural disasters. Amid the growing demand for insurance from large and medium-sized enterprises, the system of interaction between farmers and insurers is ineffective.

Central Asia is among the regions exposed to destructive natural events. In Kazakhstan, about 300 thousand people suffer from floods each year, at a GDP cost of up to USD 3 billion.

According to the director of the Center for Emergency Situations, Valeriy PETROV, "The development of insurance system is highly necessary. There are no clear mechanisms in Central Asia. The insurance system is in its infancy. In Kazakhstan, the law of insurance against emergencies has not been yet adopted, but it is under consideration. We can observe similar situations in other Central Asian countries," he said.

The Deputy Director of the Investment Policy Department at the Ministry of Agriculture of Kazakhstan, Azamat KHAMIEV, believes that inconsistency in the current insurance system with modern requirements is related to low insurance indemnities (an average 20% of a farmer's losses). Also, among reasons for underdevelopment he noted a lack of system transparency and insurer interest (currently there are only 1-2 companies in the segment).

Speaking about the reform, he stated that the draft law provides for a transition to voluntary insurance for a whole range of products with their own specific tariffs. The Ministry will "subsidize insurance premiums on behalf of the state, but precisely for those products, that are aimed at solving state issues in agriculture," KHAMIEV explained.



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