Page 34 - Azerbaijan State University of Economics

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

including Brazil, China, the Republic of Korea, Turkey, and the United States. Despite this recent

growth, penetration is still much lower than non–life insurance penetration in most countries [1,2].

Global agricultural premium volume increased dramatically between 2004 and 2007, rising

from $8 billion to about $20 billion, $15 billion of which is captured by the World Bank survey.

This stunning increase was caused by rising agricultural commodity prices and sum insured

values on which premium was paid; the expansion of agricultural insurance in China, Brazil, and

Eastern Europe; and increasing government subsidy support in major countries, including Brazil,

China, the Republic of Korea, Turkey, and the United States. Despite this recent growth,

penetration is still much lower than non–life insurance penetration in most countries [1].

The agricultural insurance penetration rate is lower than the non–life insurance penetration

in all groups of countries classified by development status. The gap decreases with development

level. Agricultural insurance takes a long time to take off. The United States and many European

countries have had some form of crop or livestock insurance for more than a century and are

mature markets with high penetration rates. In contrast, in many developing countries,

agricultural insurance has been operating for only 5–10 years (even less in countries introducing

index-based insurance), and agricultural insurance demand and uptake have yet to take off.

Agricultural insurance provision is dominated by high-income countries and China. Almost 90

percent of global agricultural insurance premium volume is underwritten in high-income

countries. In 2008 the agricultural insurance premium volume in China was estimated at $1.75

billion, making this middle-income country the second-largest agricultural insurance market after

the United States. Agricultural insurance provision is largely dominated by crop insurance [3,4].

Index-based crop insurance is available, mainly at a pilot stage, in one out of three

surveyed countries. Such insurance—in which indemnity payments are based on an index (such

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