Page 36 - Azerbaijan State University of Economics

Y.V. Aleskerovа: Governmental support to agricultural insurance in the countries of the world

lower-middle- and low-income countries, agricultural insurance is often compulsory for

borrowers of agricultural loans. This type 10 Government Support to Agricultural Insurance:

Challenges and Options for Developing Countries of credit-linked insurance may offer new

opportunities to develop agricultural insurance in middle- and low-income countries [7].

Agricultural reinsurance is purchased mainly from private reinsurers. It is usually critical for

domestic agricultural insurers to secure enough risk capital in case of a major disaster causing

catastrophic insurance losses. In two-thirds of the surveyed countries, the provision of agricultural

reinsurance is from private reinsurers. In 22 percent of the surveyed countries, agricultural

reinsurance is provided by both public and private entities. Some countries (including Costa Rica,

Iran, Japan, and Kazakhstan) rely only on public reinsurance. Premium subsidies are the most

common form of public intervention in agricultural insurance. Almost two-thirds of the surveyed

countries (at all levels of development) provide agricultural insurance premium subsidies, with

subsidies usually on the order of 50 percent of the original gross premium. Some countries also

offer variable premium subsidies. A few countries, such as India, cap premiums [1,2].

Premium subsidy programs are offered mainly under MPCI or area-yield insurance (a major

exception is South Africa, which offers nonsubsidized MPCI to individual farmers). Most named-

peril crop insurance products, such as hail insurance, have been offered for many years without any

public subsidies. Government intervention in livestock insurance is much lower than for crop

insurance: only 35 percent of the surveyed countries offer livestock insurance premium subsidies.

Governments also provide public reinsurance (32 percent of surveyed countries), subsidies on

administrative and operational expenses (16 percent), and loss adjustment subsidies (6 percent).

Public sector support to reinsurance is higher in high-income than middle-income economies. Forms

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