ABOUT PROJECT
2007 - present
Supported with funds from the Canadian International Development Agency (CIDA)
The project implemented by the International Finance Corporation (IFC) in partnership with the Canadian Agency for International Development (CIDA) facilitates the development of the agri-insurance system in Ukraine. The project works in partnership with key ministries, agencies, and the parliament -- as well as the private sector. A major activity underlying the private sector development involves the enactment of an enabling legislative and regulatory environment. Working with insurance companies, and using new product development as the primary development tool, the project develops the capacity of insurance companies to provide insurance programs and services to agricultural producers. The new products developed are launched in the market, and thus the Project works directly with farmers in pilot marketing programs and assesses farmer acceptance and satisfaction.
The Challenge
Development of agri-insurance is hindered by a poor understanding of risk management in the agri-sector, weak technical capacity of insurance companies, the lack of actuarially-sound insurance products, limited access to re-insurance, and lack of trust by producers towards insurance in general. The inability to effectively manage risk at the producer level consequently limits the ability of producers to access finance and grow their operations.
The IFC Approach
The project uses a systems approach to help build the agri-insurance sector. One of the key activities is to help state agencies to develop the strategic plan for agri-insurance development in Ukraine and promote improvements in the regulatory environment with the view of establishing rules of the game and stabilizing producers’ incomes in the long run. To this end, the project facilitated development, through a participatory process, of the Concept of Agri-Insurance Development and supports passage of the law On Agri-Insurance with Government Support (passed on 1st and 2nd Parliament reading but currently vetoed by the President due to technical issues). In 2012 the Project will continue working with the key Ministries to improve the Ukrainian legislation.
Another important activity is to help build the technical and management capacity of insurance companies. The project uses standard product as a development tool and successful reinsurance as an indicator of progress. The project created a Data Depository which is used for purposes of developing new insurance products on the basis of actuarially sound calculations. The project provides wide-scale training and consultations to insurance companies. Since the beginning of the Project, 642 consultations were provided to 462 entities; and 300 training events for insurers covered a wide range of topics from data management and actuarial calculations to re-insurance.
The project also develops a training and certification program for agri-insurance specialists (underwriters, surveyors, actuaries, loss adjusters) and works with banks to develop and improve the quality of collateral to improve access to finance for agricultural producers. During 2010-2011, we delivered 18 training events to 4 banks to increase the banks’ competence in use of agri-insurance as quasi-collateral for loans. The project works with banks and input suppliers to develop insurance products that meet their requirements. Within the pilot project with Raiffeisen Bank Aval (RBA) the bank officially approved all the Project’s standard insurance products. The Project regularly undertakes training sessions to raise professional skills of the bank’s specialists and the specialists from insurance companies, the bank’s partners. The Project conducted 10 training sessions within the pilot project with RBA.
In emerging markets, insurance companies are small and generally the volume of sales is too insignificant for major reinsurers. The model in Ukraine includes creating associations and pools of insurance companies for product development, reinsurance, data management, etc. On February 1, 2011, the Agri-Insunrance Bureau was established in Ukraine -- a pool of insurance companies that join their resources to provide quality insurance services to farmers and improve their access to finance. Currently the Project works over the official registration of the Pool.
In parallel with this, the project makes a major effort to improve the insurance culture by consumer advocacy and facilitating the development of representative structures and involving them in the decision-making process for new products. To this end, the project provides training and consulting on such issues as choice of an optimal type and object of insurance, selection of an insurer, as well as specifics of the terms of insurance contracts. This work is implemented in the framework of a large-scale information and education campaign. In 2009/11, 4520 producers running over 2.7 million ha of farmland took part in 205 training events all over Ukraine. Due to the project’s media activities, agri-insurance becomes an increasingly common theme in the press (2200 media appearances).
The project collaborates with the Ministry of Agrarian Policy in developing standardized procedures and programs for crops and livestock insurance. During 2009 – 2010 the Project developed a number of standard insurance products to insure winter crops (wheat, barley, triticale and rye), winter canola (rapeseeds); in 2011 – for summer crops (wheat and barley), sunflower and corn. In 2012 the Project expects to develop and launch for test marketing two more insurance products for sugar beets and apples hail insurance product. During test marketing, 76,000 ha of winter crops were insured; the premiums amounted to $4 million and the sum insured totaled $237,5 million.
Anticipated Impact
The project’s cohesive approach will result in increased awareness about agri-insurance, improved products and delivery, and positive developments in the volume of insurance contracts written. Additionally, the Pilot Program will foster sustainability as evidenced by a mechanism to introduce new market oriented products and in the volumes and terms of credit received due to a positive linkage of agri-insurance and finance.
Considering just small grains, the potential impact of the new insurance products is 12.2 million ha. In addition, Ukraine is a major exporter and with great potential for development. The work will contribute to alleviating the world food crisis.
