Page 39 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.71, # 2, 2014, pp. 31-41

Developing Countries better assess their liabilities in case of natural calamities and devise appropriate

financial strategies. Governments must carefully analyze the fiscal implications of government

sponsored agricultural insurance programs, whose costs may not be sustainable in the long term.

Subsidies on agricultural insurance premiums should be carefully considered, because they can distort

price signals and provide inappropriate incentives to farmers and herders to invest in unprofitable

farming activities. The World Bank survey does not support the argument that premium subsidies are

always a prerequisite if farmers and livestock breeders are to purchase voluntary crop and livestock

insurance, as shown by several named-peril crop insurance programs [10].

Scientific novelty of the research lies in the fact that the author has made specific

proposals and recommendations on the modernization of agricultural insurance in the world,

depending on climatic conditions while using assistance of the World Bank.

Conclusions. Where subsidies are offered, planners should carefully identify which

beneficiaries, crop or livestock sectors, and regions to target and whether the subsidies will be

provided for a limited period or phased out over time once agricultural insurance takes off and

achieves a critical presence in the market. In start-up situations, where market infrastructure is

not yet developed, a technical support unit could be established to provide specialized services to

agricultural insurance companies and other risk-pooling vehicles. This unit should have support

from the government, insurers, and reinsurers. It could be either a stand-alone entity or hosted by

an insurance provider (such as agricultural insurance pools or monopoly insurer).

The goals of the technical support unit would include the following:

• Create a center of expertise able to support the development and scaling up of agricultural

insurance.

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