After three years of try-out, the Ministry of Finance of Vietnam released the latest assessment on agricultural insurance, showing agricultural insurance is still a high-risk field and is shrugged off by insurers. However, for farmers who have bought insurance policies, agricultural insurance is really necessary. Reportedly, under the direction of Deputy Prime Minister Vuong Dinh Hue, the Ministry of Finance is compiling a draft document on extensive deployment of agricultural insurance which will be submitted to the Government for approval.
The Ministry of Finance said after three years of piloting insurance for three agricultural products, namely rice, livestock and fishery, up to 304,017 farming households and production organisations took part in the pilot programme. Total insurance coverage valued VND7,747.9 billion and insurance premiums totalled VND394 billion.
Insurers suffer losses?
Total insurance indemnity amounted to VND712.9 billion. Among three insured items, insurance for cultured aquatic products (shrimp and fish) is the riskiest and the most uncontrollable. High risks from agricultural insurance and unsuitable insured agricultural products caused both insurers and farmers to lose interests in agricultural insurance. According to remarks by the Insurance Supervisory Authority (ISA) under the Ministry of Finance, insurers are suffering huge losses from rice, livestock and fishery insurance.
However, the picture is not completely dark. A report by the Ministry of Finance showed that premiums from fishing boat insurance valued VND387 billion as of June 2016 and insurance compensations were just VND59.8 billion (equal to 15 per cent of total premiums). All 28 coastal provinces and cities had insurance for vessel hulls, fishing gear and crew members with a total estimated insurance coverage of VND37,412 billion. Up to 14,977 vessel hulls and fishing gears and 145,960 seafarers were insured.
Nevertheless, only four insurers are qualified for this field, including Bao Viet Holdings, Bao Minh Insurance Corporation, Petrolimex Joint Stock Insurance Company (Pjico) and PVI Insurance Corporation.
Mr Nguyen Quang Huyen, Deputy Director of Insurance Supervisory Authority, said, as insurance for fishing vessels is of great value, estimated at VND12 trillion, only eligible insurers certified by the Ministry of Finance can provide this type of insurance. Since the insurance coverage value is huge, none of insurers dares to provide sole insurance. When an insurer accepts an insurance policy, three others will act as co-insurers. He noted that it is uncertain that insurers of fishing boats took hefty profits because they have to pay various costs like operation costs, administrative costs and risk provisions.
Agriculture insurance to be expanded
In July 2016, the State Bank of Vietnam (SBV) sent a review report on the implementation of the Resolution 14 of the Government dated March 5, 2014 on a pilot lending programme for agricultural production to the Prime Minister. The central bank said that, after two years of implementing the pilot programme, actual disbursements exceeded the original value pledged by commercial banks by more than VND1,700 billion. As many as 28 companies in 22 provinces and cities carried out 31 linked agricultural production projects and applied high tech to these projects. Eight commercial banks joining the programme financed over VND5,627 billion to 28 companies. As of June 2016, a total of VND7,333.73 billion was disbursed for 31 projects, more than VND1,700 billion higher than the originally pledged value. Four projects were lent for expansion. Currently, the outstanding loan value is VND915.84 billion, including VND807 billion of short-term loans and over VND107 billion of long-term value.
|
According to the Decree No. 55/2015/ND-CP, enterprises and cooperatives taking part in production chains and applying high tech in agricultural production can borrow up to 70 - 80 per cent of project value without security assets.
In case of objective and subjective reasons and force majeure, commercial banks will consider restructuring debts for borrowers and even relieving debts for them when the Prime Minister agrees.
|
According to the SBV, the lending programme has helped companies to carry out production links, promote new effective agricultural production trends, enhance added value and sustainable development, and bring benefits to companies, farmers and commercial banks. Despite positive values achieved, the SBV expressed concerns over the possibility of commitment breach by stakeholders in production chains. This occurrence will cause significant damages for stakeholders and commercial banks. Ineffective agricultural insurance policy discourages companies from investing production chains.
Being heavily reliant on nature, unpredictable natural disasters pose high risks on agricultural production. Thus, agricultural insurance is necessary.
At the same time, the widespread deployment of agricultural insurance is also a solution to remove difficulties in credit supply for agricultural restructuring towards sustainability.
Vietnamese
