Public-Private Partnerships for Risk Management in Agriculture: Turkish Experience

Public-Private Partnerships for Risk Management in Agriculture:

Turkish Experience

“Global Conference on Insurance and Reinsurance Pools for Natural Catastrophe Risk” (8-9 December 2005 – İstanbul)

Bülent BORA Director General, TARSIM

Agricultural Insurance Pool Management, Turkey

Public-Private Partnership in Risk Management in Agriculture in Turkey

After several unsuccessful attempts for the establishment of a sound agricultural insurance system in Turkey, long-expected agricultural insurance law allowing public-privatepartnership, offering technical and economic resources to preserve the agricultural sector from suffering underdifficult conditions, finally was passed on 14.06.2005.

Public-Private Partnership in Risk Management in Agriculture in Turkey

Aim of the Agricultural Insurance Law No. 5363

Determination of procedures and principles regardingthe implementation of agricultural insurance in order tocompensate farmers for losses occurring in theiragricultural activities due to natural risks.

Legal Regulations for the New Agricultural Insurance System

• Law (5363/ 2005 June 14th) for Agricultural Insurance.

• Regulation (2005 Sept. 22) for Working Procedures and Principles of Agricultural Insurance Pool.

• Regulation (2005 Sept. 22) for Implementation of Agricultural Insurance.

Institutions which are Involved in the New Agricultural Insurance System of Turkey

Union of the Turkish Chambers of Agriculture

Association of the Insurance and Reinsurance

Companies of Turkey

Government Private Sector Organizations (Insurance and Agriculture)

Ministry of Agriculture and

Rural Affairs

Undersecretariat of the Treasury

Insurance Companies

TARSIM

Agricultural Insurance Pool

TSV

Institutions which are Involved in the new Agricultural Insurance System of Turkey

Agricultural Insurance Pool • Management Committee• Managing Company (TARSIM)


Members of the Management Committee (7) :

• Ministry of Agriculture and Rural Affairs (2)

• Undersecretariat of the Treasury (2)

• Association of the Insurance and Reinsurance Companies (1)

• Union of the Turkish Chambers of Agriculture (1)

• Managing Company of the Pool - TARSIM (1)

Duties of the Management Committee

• Determination of the principles of implementation regarding the operation of the Pool.

• Carrying out studies for determination of crops, risks, and regions to be supported.

• Carrying out studies for determination of the ratio of subsidies on the basis of crops, risks and regions.

• Fixing problems faced in practice and carrying out studies to solve them.


Duties of the Management Committee

• Determination of principles and procedures for loss adjustment.

• Making contracts with insurance companies writing agricultural business within the context of this law.

• Making contracts with the Managing Company regarding working principles and procedures.

• Determination of the commission of the insurance companies in return for their premium transfer.


Managing Company (TARSIM) TARSIM, a management entity, was established as a corporation by the insurance companies writingagricultural business in order to carry out all tasks of the Pool, within the context of the law.

Insurance companies (presently 16) participate toTARSIM with equal shares.


Duties of TARSIM

• Carrying out all kinds of works and organizations for loss adjustment activities.

• Carrying out the activities concerning risk sharing, risk transferring and implementation of reinsurance plan, and presenting reinsurance program for approval to the Management Committee of the Pool.

• Implementation of the decisions taken by the Management Committee and fulfilling the secretarial works of the Pool.

• Collection of the premiums and payment of indemnities.


Duties of TARSIM

• Informing farmers regarding agricultural insurance and carrying out public relations and publicity campaigns.

• Keeping statistics and preparing reports of the agricultural insurance for the Management Committee.

• Direction of resources of the Pool for investment.

• Making suggestions to the Management Committee in necessary cases.

• Carrying out all other works and operations related to the management of the Pool.


Institutions which are Involved in the new Agricultural Insurance System of Turkey

Duties of the Ministry of Agriculture and Rural Affairs

• Taking necessary measures to develop and expand agricultural insurance.

• Presenting proposals for approval to the Council of Ministers regarding premium subsidies on the basis of crops, risks, and regions.

• Monitoring regular and proper payments of indemnities.• Organization of seminars, training and publications.• Cooperation with the Pool and Managing Company.• Payment of the premium subsidies of the farmers to the

Managing Company.

Risks to be Covered

Natural risks to be covered such as drought, hail, flood, storms, tornadoes, earthquakes, fire, uncontrollable pests, diseases, and accidents for crops,greenhouses, agricultural buildings, agriculturalmachinery and livestock shall be determined by theCouncil of the Ministers based on the proposals of theManagement Committee of the Pool.

Basic Elements of the New Agricultural Insurance System in Turkey


Participation

• Participation of the farmers in the Insurance System is voluntary.

• All insurance companies which have a licence for selling agricultural insurance shall participate to the agricultural insurance pool with equal shares.

Basic Elements of the New Turkish Agricultural Insurance System

Marketing and Sale of InsuranceSales and marketing activities shall be carried out by thetraditional way and means of the insurance sector:

Insurance Intermediaries Other Sales Channels of insurance companies

Insurance contracts shall be issued with the name of theunderwriting insurance company according to the conditionsand standards as determined by the Pool.

Risk sharing and Reinsurance

• All premium collected by insurance companies and total risk shall be transferred to the Pool.

• Pool holds the authority to retrocede the risks to insurance companies (subject to acceptance) .

• In cases when sufficient retrocession is not realized, then the government will participate automatically for the rest of the risks.


Risk Sharing and Reinsurance

• Necessary arrangements for reinsurance agreements with domestic and international companies and institutions shall be carried out by TARSIM.

• In case protection received from domestic and international reinsurance market is not sufficient, the excess, which shall be determined by the Council of Ministers, shall be guaranteed by the Govenment.


Premium Subsidy

• With the aim of promoting the development of the agricultural insurance, premiums of the farmers shall be subsidized by the Government.

• The amount of premium subsidy shall be determined by the Council of the Ministers annually according to the proposal of the Ministry of Agriculture and Rural Affairs on the basis of crops, risks, regions and farm size.

• Only the registered farmers in the Farmer Registration System shall be eligible for premium subsidy.


Supervision

Insurance implementations of TARSIM shall be supervised by the Undersecretariat of the Treasury, all other operations shall be supervised by the Ministry of Agriculture and Rural Affairs.


Farmers

ReinsuranceCompanies

Prem

iumClaim

Paym

entPRIME MINISTRY Turkish Treasury

AIF AGRICULTURAL INSURANCE FOUNDATION (VAKIF-TSV)

•Loss Assesment Organization•Risk inspection Organization•Research and Development (Data collection, Databank, GIS, Risk Analysis)•Training Support

INFRASTRUCTURE FOR AGROPOOL

INSURANCE COMPANIES

•Underwriting•Marketting•Sale•Claim Payment

TURKISH AGRICULTURE INSURANCE ORGANISATION 2005

Source: TSV

Farmers

ReinsuranceCompanies

Prem

iumClaim

Paym

entPRIME MINISTRY Turkish Treasury

AIF AGRICULTURAL

INSURANCE FOUNDATION (VAKIF-TSV)

•Loss Assesment Organization•Risk inspection Organization •Research and Development (Data collection, Databank, GIS, Risk Analysis)

INSURANCE COMPANIES

•Marketing•Sale

TURKISH AGRICULTURE INSURANCE ORGANISATION 2006

Premium Subsidies

AGRICULTURAL INSURANCEPOOL “Board”

(Ministry of Agricultural and Rural Affairs, Prime Ministry Turkish

Treasury, Association of the Insurance and Reinsurance Companies of Turkey,

Union of Turkish Chambers of Agriculture, Administation and Services

Company for Pool-TARSİM)

Ministry of Agricultural and

Rural Affairs (MARA)

•Premium Collection•Reinsurance Supply

GOVERMENT SUBSIDIES

TARSİM_ADMINISTRATION AND SERVICES COMPANY FOR POOL

Claim Payment

•Claim Payment

Premiums

AIF AGRICULTURAL INSURANCE

FOUNDATION (VAKIF-TSV)Training for Lossadjusters

risk inspectors And Insurance sector

•Underwriting

Source: TSV

Thank you for your attention.....

Public-Private Partnerships for Risk Management in Agriculture:

Turkish Experience

“Global Conference on Insurance and Reinsurance Pools for Natural Catastrophe Risk” (8-9 December 2005 – İstanbul)

Bülent BORA Director General, TARSIM

Agricultural Insurance Pool Management, Turkey

Public-Private Partnerships for Risk Management in Agriculture: Turkish Experience

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