Insurance problems and prospects in Latvian agriculture | Apdrošināšanas problēmas un perspektīvas Latvijas lauksaimniecībā
2009
Graudina, A., BA School of Business and Finance, Riga (Latvia)
Agriculture is subject to the impact of natural risks, which results in annual losses suffered by agricultural producers. The State, at its own expense, compensates agricultural producers for losses, with the subsidies amounting to LVL 2.1 million on average. Since 2000, the insurance scheme for insuring risks in crop farming sector established by the Ministry of Agriculture has provided for subsidizing persons involved in growing of crops, in the amount of 50% of the insurance premium payments. The necessity of the involvement of the State in the agricultural risks (systematic risk) management has been historically proven in EU Member States and other counties. In the European Union, cereal crop risk management is effected on two levels: governmental emergency funds (ad hoc) and private insurance. The experience of the EU and other countries shows that the public and private partnerships are possible on both levels and in different proportions as far as compensated losses are concerned. Procedures and requirements for the formation of emergency funds are set and defined on the European Union level. This paper is based on monographs of agricultural risk insurance specialists and EU documents on agricultural risk insurance, such as Commission Regulations, the research summarizing the experience of Latvia and other countries. These publications do not contain methodological or other solutions for agricultural risks and their insurance. An important factor of the relevancy of the theme is the necessity of a special original model for the crop risk insurance service, defining the methods for calculating coverage, premiums and compensations by using average crop indicators in Latvia's countryside, when a systematic database of statistics of crop loss is not available.
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