AGRI-INSURANCE MARKET IN UKRAINE IN 2012

IFC Advisory Services in Europe and Central Asia Ukraine Agri-Insurance Development Project AGRI-INSURANCE MARKET IN UKRAINE IN 2012 Analytical Study In partnership with

Research Note The hereby presents the findings of a research study of the agri-insurance market in 2012 This study covered the underwriting year and offer some preliminary data on indemnity payments throughout the spring-summer season. The research was based on the data provided by the Ukrainian insurance companies. In November 2012, the Project contacted the insurance companies to request the data. The agri-insurance data for 2012 were available for 14 insurance companies. The previous research reports employed data from 13 (in 2010), 17 (2009), 16 (2010), 1 and 15 (2011) companies. One could observe some market consolidation during the last four years. The number of providers remained stable with most coverage being provided by the same insurers Agricultural insurers in 2011 - ASKA - Providna - Brokbusiness - Strakhovye Garantii - Dominanta - TAS - INGO Ukraine - Ukrainian Agrarian Insurance Company (UASK) - Knyazha - Universalna - Oranta - UNIQA - Oranta-Sich - PZU Ukraine It is important to notice that several companies offered agricultural insurance for one season only. In autumn 2011, such companies as Dominanta, Knyazha and Strakhovye Garantii did not sell a single contract. We do not know the reasons for which these companies missed the first season, however we included their data (for the underwriting season in total and periods when they were actually operating in the market) in the dataset. 1 Insurance of winter crops for the 2009-2010 winter. 2 Agri-Insurance Market in Ukraine in 2012

The Agricultural Market in 2012: overview The agri-insurance market continued to develop in 2012 despite the absence of any public support. 2 The major indicators of agri-insurance in 2012 are, in fact, better than those from 2009-2011 (see: Table 1). As in 2011, the classic insurance programs dominated in the market. Formal insurance took place at a modest level, mainly for pledged crops. Such formal contracts, providing for very low premium rates, were most likely to be signed in the spring-summer before harvesting. Once again, the forward grain purchase program of the Agrarian Fund had a powerful impact upon agricultural insurance in spring-summer 2012. Consequently a number of the insurers participating in the program managed to collect high premiums during the season. All major indicators of the agri-insurance market were calculated based on the data from the 2012 underwriting year, i.e. the contracts insuring yields and crops harvested in summerautumn 2012. Such an approach allowed us to correctly estimate the portfolio loss ratio as the indemnities for winter crop losses during the winter are to be paid in the next calendar year. The international re-insurers apply the same principle to assess the losses of the crops harvested in the current calendar year (for which the indemnities are to be paid in the same year). The changes in the analysis of the major indicators are associated with the introduction of new insurance products for winter crops covering the whole production cycle in 2009. These new products cover the whole production cycle - from seedling emergence to harvesting. Thus the analysis based on the data limited within the current underwriting year seems to be more adequate. The situation with insurance premiums was somewhat complicated. The average premium rate in the 2012 underwriting year was 3.77%. In 2011 the average rate was 3.74%. The average premium rate in the winter crop insurance for the overwintering season was 8.12%, significantly higher than that in 2011 (6.39%). Additionally, the introduction of the new insurance products had an impact upon the rates - the rates under newly introduced products were calculated based on the new actuarial principles (by predominantly the experts of the IFC Project). The average premium rate for spring-autumn 2012 was 3.19% (3.38% in 2011). In 2009, the average rate for all contacts insuring crops for the spring-autumn season was 3.59%. 2 Across the world, multi-peril insurance programs normally do not develop without public support. The government may support the agri-insurance sector through premium subsidies, subsidising administrative/operational costs, CAT re-insurance, etc. In Ukraine, crops and yield are normally insured under multi-risk products. As far as we were informed at the time when this report was being prepared, the government was going to launch a subsidy program already in the 2013 underwriting year. 3 Agri-Insurance Market in Ukraine in 2012

Indicator Year Crop insurance in 2005-2012 3 Table 1 2005 2006 2007 2008 2009 2010 2011 2012 Contracts 910 1,330 4,397 1,637 1,980 1,217 2,710 1,936 Acreage, thousands hectares 390 670 2,360 1,171 510 553 786 727 Premium, UAH millions 12.8 28.5 116.7 155.4 42.0 72.1 136.3 130.4 Subsidy, UAH millions 5.8 12.5 47.8 72.8 - - - - Average premium rate, % 3.79 n/a 4.54 4.93 3.24 3.84 3.74 3.77 Indemnity, % n/a n/a n/a n/a 36.48 50.94 28 41 Data by Region In the underwriting year 2012, the producers in the Oblasts of Poltava, Lugansk, Vinnytsya, Donetsk, Kirovograd, Lviv, Kharkiv and Dniepropetrovsk were most likely to insure. Poltava Oblast was the leader by the number of contracts sold (527, i.e. 27% of all contracts in Ukraine). The insurance covered 84,800 hectares in Poltava Oblast (11.6% of the total insured acreage in the country). In this oblast, insurers collected premiums worth UAH 46 m. (35% of the total). The Table 2 below presents the major indicators of crop insurance per oblast. 3 The data for 2005-2009 have been compiled based on the insurance contracts per calendar year. The data for 2010-2012 are based on the contacts for the underwriting year. 4 Agri-Insurance Market in Ukraine in 2012

Indicator Oblast Crimea Autonomous Republic Agri-insurance by region, 2012 underwriting year Contracts Total acreage, hectares Sum insured, UAH Premium total, UAH Premium rate, % Table 2 Premium, UAH per hectare 27 9,068.59 78,334,624.66 1,665,884.09 2.13 183.70 Vinnytsya 135 52,796.41 268,577,518.84 7,786,476.86 2.90 147.48 Volyn 26 9,358.01 50,810,528.61 1,576,809.33 3.10 168.50 Dniepropetrovsk 84 37,927.34 123,315,506.24 2,448,029.21 1.99 64.55 Donetsk 58 48,930.82 214,963,561.93 5,862,530.51 2.73 119.81 Zhytomyr 76 24,868.46 92,210,079.14 3,152,302.45 3.42 126.76 Zakarpattya 4 1,272.00 5,532,521.00 214,439.00 3.88 168.58 Zaporizhzhya 44 31,789.11 147,096,271.26 3,962,829.78 2.69 124.66 Ivano-Frankivsk 22 4,680.19 25,201,990.71 994,729.59 3.95 212.54 Kyiv 82 27,136.55 139,488,397.51 3,288,734.06 2.36 121.19 Kirovograd 112 42,575.89 166,500,873.35 4,143,258.38 2.49 97.31 Lugansk 60 55,641.11 248,643,028.90 5,796,975.08 2.33 104.19 Lviv 38 38,480.18 116,066,991.10 4,197,794.96 3.62 109.09 Mykolaiv 39 12,240.00 31,952,143.09 1,084,441.93 3.39 88.60 Odesa 70 23,421.62 49,624,211.98 2,478,881.00 5.00 105.84 Poltava 527 84,877.15 765,448,051.80 46,080,690.98 6.02 542.91 Rivne 34 15,977.98 88,765,001.38 2,400,799.14 2.70 150.26 Sumy 111 32,773.32 104,578,315.92 3,733,158.48 3.57 113.91 Ternopil 50 30,249.97 131,778,770.79 4,452,530.30 3.38 147.19 Kharkiv 100 38,326.25 208,319,330.80 9,225,371.28 4.43 240.71 Kherson 54 28,819.16 94,460,327.10 2,899,686.65 3.07 100.62 Khmel nytsk 58 22,568.01 89,154,693.45 3,815,655.76 4.28 169.07 Cherkassy 43 21,508.97 94,330,801.18 4,784,828.70 5.07 222.46 Chernivtsi 9 1,233.83 7,701,332.88 258,371.95 3.35 209.41 Chernigiv 73 30,817.71 119,826,438.73 4,170,675.72 3.48 135.33 TOTAL 1,936 727,338.63 3,462,681,312.35 130,475,885.18 3.77 179.39 5 Agri-Insurance Market in Ukraine in 2012

Insured acreages by region as % of the total acreage insured Chart 1 Premiums by region as % of the total premiums collected Chart 2 Data by Insurer 6 Agri-Insurance Market in Ukraine in 2012

In the underwriting year 2012, the Ukrainian Agrarian Insurance Company was leading by the number of contracts sold. The company sold 648 contracts (33.5% of all contracts sold in 2012). The Company Providna was rated second with 366 contracts (18.9%) and the PZU Ukraine Company third (149 contracts or 7.7%). Chart 3 The Company Providna was leading also by the acreage insured the company insured crops on some 126,000 (17.3% of the total acreage insured in 2012). The Company UASK insured 113,000 hectares or 15.6% of the total acreage insured in Ukraine, and PZU Ukraine insured 104,000 hectares (14.3%). Chart 4 7 Agri-Insurance Market in Ukraine in 2012

The Ukrainian Agrarian Insurance Company (UASK) was leading by amount of premiums collected. In the 2011 underwriting year, this company collected UAH 49.7 m. (38.1% of the total premium collected in the market). The company s average portfolio rate was 5.66% 4. Chart 5 Insurer Agricultural insurance by company: the major indicators in 2012 underwriting year Indicator Contracts Total acreage, hectares Sum insured, UAH Premiums total, UAH Table 3 Average premium rate< % ASKA 146 65,866.61 233,854,386.49 9,475,838.88 4.05 Brokbusiness 71 46,023.12 354,376,613.79 10,185,288.86 2.87 Dominanta 38 24,402.00 172,617,667.00 6,081,702.00 3.52 INGO Ukraine 114 75,208.95 171,064,503.93 7,506,725.75 4.39 Knyazha 25 7,910.20 45,481,163.93 1,093,668.93 2.40 Oranta 120 32,579.02 62,330,545.46 3,649,147.36 5.85 Oranta-Sich 11 3,137.00 3,675,500.00 80,170.00 2.18 Providna 366 126,036.47 664,606,104.73 24,005,750.71 3.61 Strakhovye Garantii 99 63,798.78 398,860,063.36 8,142,611.11 2.04 TAS 81 13,247.82 37,397,580.05 1,492,362.82 3.99 UASK 648 113,593.18 793,318,539.41 49,763,832.58 6.27 Universalna 5 1,476.00 3,308,391.50 251,958.85 7.62 UNIQA 63 49,940.00 227,023,730.31 4,736,967.33 2.09 PZU Ukraine 149 104,119.48 294,766,522.39 4,009,860.00 1.36 TOTAL 1,936 727,338.63 3,462,681,312.35 130,475,885.18 3.77 4 The company Universal na applied the highest rate in the market (7.62%). 8 Agri-Insurance Market in Ukraine in 2012

Contracts Acreage insured, hectares Premiums, UAH Sum insured, UAH Indemnities, UAH Winter Crop Insurance (Contracts signed in autumn 2011) Background In autumn 2011, insurance companies signed 611 contracts, including 167 contracts providing the full cycle coverage. The most popular product amongst the producers was the product providing for insurance for winter crops against total harvest loss during winter (228 contracts). One hundred and fifty sixty three contracts insured winter crops for the full production period from seeding to harvesting. The program is being implemented since 2009. It does not provide for any deductible. Additionally, 4 contracts provided for insurance against total harvest loss. This program is being implemented since 2010 and provides for a coverage level. The third most popular program was that insuring against total harvest loss or partial yield loss during overwintering and spring (i.e. insurance against spring frosts). Sixty six contracts under this program were signed. Fifty producers preferred to insure against total harvest loss only (including losses from late frosts). In autumn 2011, only two producers insured vine lands and no gardens were insured. In autumn 2011, the total insurance sum under the contracts insuring winter crops and perennial plantings was UAH 404.84 m. The total premiums amounted to UAH 32.85 m. The total insured acreage was 203,300 hectares. The average premium rate was 8.12% (6.39% in 2011). Table 4 Major indicators by insurance program in autumn 2011 Indicator Program Total loss 228 107,566.16 9,256,291.06 190,033,840.97 15,536,142.40 Total loss with coverage applied (IFC standard product) Partial yield loss and total harvest loss 4 4,656.00 805,765.43 7,600,842.89 341,509.95 66 31,536.56 1,979,806.60 38,741,322.38 6,921,452.24 Full production cycle 14 3,606.00 508,564.47 12,272,263.66 468,420.00 Insuring winter crops for the full production cycle (IFC standard products) 153 20,487.99 16,687,332.08 117,206,841.89 8,745,604.29 Total loss + late frosts 50 8,292.50 1,132,329.66 18,421,758.23 1,020,139.29 9 Agri-Insurance Market in Ukraine in 2012

Total loss and some yield loss + late frosts 94 27,004.81 2,367,314.53, 14,262,528.22 868,272.29 Vine lands 2 119.00 105,707.96, 6,302,287.88, 0.00 Crop Data Total 611 203,269.02 404,841,686.12 32,857,858.75 33,787,136.60 In 2011, the producers of winter wheat and winter rapeseed were most like to insure their crops (345 and 214 contracts respectively). Chart 6 The insured acreage was 105,600 hectares under wheat and 84,100 hectares under rapeseed. Chart 7 10 Agri-Insurance Market in Ukraine in 2012

The producers paid the total premium worth UAH 22.07 m. to the winter wheat insurers and UAH 9.2 m. to the rapeseed insurers. Chart 8 Throughout spring 2012, the insurers received 133 notifications of partial crop loss or total crop loss for winter wheat and 88 for rapeseed (241 notifications in total). According to the insurers, the yield loss was confirmed in 195 cases (110 for winter wheat and 71 for rapeseed). Following the 2011 winter, the affected acreage under winter wheat was 14,500 hectares (10,700 hectares under rapeseed). These producers were paid UAH 33.7 m. of indemnity (including UAH 15.7 m. to wheat producers and almost UAH 15.2 to rapeseed producers). Accordingly, the loss ratio was 103% (in 2011, the loss ratio for the same period was 67% and in 2010 184%). Chart 9 11 Agri-Insurance Market in Ukraine in 2012

Contracts Total acreage, hectares Sum insured, UAH Premium, UAH Claims submitted Indemnity payments Acreage affected, hectares Indemnity total, UAH Again, the winter barley and rapeseed crops were marked with the highest losses. The loss ratio for barley was 219% (165% for rapeseed). At the same time, for the modest total coverage of the winter barley, the total indemnity associated with the losses of winter barely was not high (UAH 2.5 m.). Thirteen indemnity payments were made for the barely crop damaged/lost on 2,600 hectares. The indemnities paid to the rapeseed producers were much higher these producers were paid UAH 15.2 m. on 71 claims (88 claims were submitted in total). The damaged area under winter rapeseed was 10,700 hectares. According to the insurance companies, they received 133 claims of winter wheat loss, of which 110 claims were settled. In total, 14,500 hectares under winter wheat were affected. The total indemnity amounted to UAH 15.7 m. The loss ratio for winter wheat was established at 71% (26% in 2011). The producers reported one rye loss on 450 hectares (the indemnity was estimated at UAH 378,000). Table 5 Major insurance indicators by crop Indicator Crop Winter wheat 345 105,556.90 248,699,893.17 22,077,428.82 133 110 14,589.71 15,708,941.52 Winter barley 39 11,738.75 19,178,878.90 1,149,984.33 19 13 2,630.60 2,523,122.06 Winter rapeseed 214 84,135.91 127,232,560.35 9,206,148.10 88 71 10,701.83 15,177,073.02 Winter rye 11 1,718.46 3,428,065.82 318,589.54 1 1 450.00 378,000.00 0.0 2 119 6,302,287.88, 105,707.96, Vine lands 0 0 0.00 0.00 Total 611 203,269.02 404,841,686.12 32,857,858.75 241 195 28,372.14 33,787,136.60 The average premium rate for winter barley was 6% (7.24% for winter rapeseed). These are higher than the rates from the previous years as the insurers had to increase the rates for winter barley and rapeseed for traditionally higher than average losses of these crops. 5 One has to note very low rates for vine lands. The average premium rate was established at 1.68%. Data by Region The participation rate varied by region. At the oblast level, Poltava Oblast was leading by the number of contracts signed (158). The participation rate was high in the Oblasts of Kirovograd (61 contracts), Sumy (44) and Kherson (39). 5 According to the available data, the winter rapeseed and barley were most loss making crops during the last three years. 12 Agri-Insurance Market in Ukraine in 2012

Contracts Acreage, hectares Sum insured, UAH Premium, UAH Claims Indemnity payments Affected acreage, hectares Indemnities paid, UAH The largest acreages were insured in the Oblasts of Lviv and Poltava (27,000 and 20,800 hectares respectively). Significant acreages were insured in the Oblasts of Ternopil (17,300), Kirovograd (17,000), Sumy (14,300) and Kharkiv (12,100). At the same time, the acreage coverage was surprisingly low in such agricultural regions as Crimea (1,200 hectares), and Kyiv Oblast (3,700). The total premiums collected in Poltava Oblast amounted to UAH 14.8 m. significantly higher than in all other regions. Relatively high premiums were collected in the Oblast of Cherkassy (UAH 2.3 m.), Kharkiv, Kherson and Lviv (UAH 1.7 m. each), Khmel nytsk (UAH 1.5 m.), Ternopil (UAH 1.3 m.) and Sumy (UAH 1.1 m.). Kherson Oblast was most affected during the winter season the affected area was 5,700 hectares. In this Oblast the insurers paid indemnities under 23 contracts. The total indemnity hit a record high amount - UAH 7.1 m. In winter 2011, large areas were affected in the Oblasts of Poltava (5,500 hectares, 60 indemnity payments of UAH 8 m. paid in total), Odesa (4,700 hectares, 23 payments of UAH 4.4 m. in total), Sumy (5.500 hectares, 17 payments of UAH 2.6 m. in total), Zaporizhzhya (1,800 hectares, 6 payments of UAH 1.3 m. in total) and Kharkiv (1,600 hectares, 13 payments of UAH 1.8 m.). The data for all regions are given in the table below. Table 6 Crop insurance by Oblast Indicator Oblast Crimea Autonomous Republic 4 1,286.70 7,804,390.86 171,814.62 0.00 0.00 0.00 0.00 Vinnytsya 20 5,732.03 10,021,421.20 589,220.32 6.00 3.00 314.65 118,141.64 Volyn 3 782.00 3,871,350.00 79,687.13 0.00 0.00 0.00 0.00 Dniepropetrovsk 15 7,221.96 9,068,621.59 528,260.52 8.00 6.00 802.52 1,611,525.30 Donetsk 11 5,031.27 7,806,859.05 292,136.95 8.00 5.00 0.00 218,542.47 Zhytomyr 26 10,022.50 15,402,966.06 728,349.60 3.00 2.00 1,112.50 2,535,554.74 Zakarpattya 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Zaporizhzhya 16 7,303.50 8,716,054.22 377,342.28 8.00 6.00 1,847.59 1,362,034.73 Ivano-Frankivsk 4 1,201.33 2,655,798.00 205,612.85 1.00 1.00 0.00 45,990.00 Kyiv 18 3,792.09 5,776,666.86 360,367.10 4.00 2.00 35.00 13,654.13 Kirovograd 61 17,011.91 20,096,534.33 1,076,683.79 21.00 15.00 1,197.00 1,182,244.53 Lugansk 8 2,185.50 2,256,353.70 125,185.06 5.00 4.00 247.30 271,303.52 Lviv 20 27,089.52 47,392,020.68 1,769,228.66 1.00 1.00 125.00 318,444.00 Mykolaiv 18 3,212.20 2,854,146.01 184,240.70 5.00 3.00 181.00 142,380.06 Odesa 33 10,182.40 12,506,287.09 751,539.45 24.00 23.00 4,711.60 4,435,038.87 13 Agri-Insurance Market in Ukraine in 2012

Poltava 158 20,812.22 108,401,388.46 14,828,404.13 61.00 60.00 5,552.32 8,001,371.79 Rivne 12 2,788.19 4,016,363.53 227,160.33 0.00 0.00 0.00 0.00 Sumy 44 14,365.30 22,044,852.58 1,165,005.31 27.00 17.00 3,593.50 2,661,088.71 Ternopil 13 17,308.46 20,899,469.05 1,350,904.02 4.00 2.00 285.80 515,162.13 Kharkiv 27 12,112.63 22,288,656.12 1,779,232.58 18.00 13.00 1,627.40 1,801,602.07 Kherson 39 11,040.08 27,064,562.55 1,778,434.65 26.00 23.00 5,718.56 7,138,741.02 Khmel nytsk 26 6,432.19 14,074,812.82 1,582,346.68 7.00 6.00 724.40 1,089,219.34 Cherkassy 22 8,573.84 18,067,958.49 2,315,066.06 0.00 0.00 0.00 0.00 Chernivtsi 2 70.00 49,770.00 3,807.41 0.00 0.00 0.00 0.00 Chernigiv 11 7,711.20 11,704,382.87 587,828.55 4.00 3.00 296.00 325,097.55 Total 611 203,269.02 404,841,686.12 32,857,858.75 241.00 195.00 28,372.14 33,787,136.60 Chart 6 The insurance rates should be analysed separately. The average insurance rate was 8.12%, however the rates significantly varied by region. The lowest rates were found in Volyn Oblast (2.1%), Crimea (2.2%) and the Oblasts Donetsk and Lviv (3.7%). The highest rates were applied in the Oblasts of Poltava (13.7%), Cherkassy (12.8%) and Khmel nytsk (11.2%). 14 Agri-Insurance Market in Ukraine in 2012

Chart 10 The loss ratios over 100% were observed in 9 Oblasts. These were the Oblasts of Odesa (590%), Kherson (401%), Zaporizhzhya (361%), Zhytomyr (343%) and Dniepropetrovsk (305%). The average rates, loss ratios, premiums and indemnities by region are given in the Table 7 below. Table 7 Agri-insurance data by Oblast Indicator Oblast Crimea Autonomous Republic Average premium rate, % Loss, % Indemnity, UAH Premium, UAH/hectare 2.20 0 0.00 133.53 Vinnytsya 5.88 20 118,141.64 102.79 Volyn 2.06 0 0.00 101.90 Dniepropetrovsk 5.83 305 1,611,525.30 73.15 Donetsk 3.74 75 218,542.47 58.06 Zhytomyr 4.73 348 2,535,554.74 72.67 Zakarpattya 0 0 0.00 0 Zaporizhzhya 4.33 361 1,362,034.73 51.67 Ivano-Frankivsk 7.74 22 45,990.00 171.15 Kyiv 6.24 4 13,654.13 95.03 Kirovograd 5.36 110 1,182,244.53 63.29 Lugansk 5.55 217 271,303.52 57.28 Lviv 3.73 18 318,444.00 65.31 15 Agri-Insurance Market in Ukraine in 2012

Mykolaiv 6.46 77 142,380.06 57.36 Odesa 6.01 590 4,435,038.87 73.81 Poltava 13.68 54 8,001,371.79 712.49 Rivne 5.66 0 0.00 81.47 Sumy 5.28 228 2,661,088.71 81.10 Ternopil 6.46 38 515,162.13 78.05 Kharkiv 7.98 101 1,801,602.07 146.89 Kherson 6.57 401 7,138,741.02 161.09 Khmel nytsk 11.24 69 1,089,219.34 246.00 Cherkassy 12.81 0 0.00 270.02 Chernivtsi 7.65 0 0.00 54.39 Chernigiv 5.02, 55 325,097.55 76.23 Data by Insurer Average 8.12 103 х 161.65 According to the data provided by the insurance companies, 11 companies insured crops and perennial plantings in autumn 2011. The companies Dominanta, Knyazha and Strakhovye Garantii provided all underwriting data for 2012 however these companies did not insure in 2010. Based on the data, the insurers can be divided into three groups. The first group consists of the obvious leaders: INGO Ukraine and the Ukrainian Agrarian Insurance Company (UASK). Each of these collected over UAH 6 m. in premiums. The company INGO Ukraine signed 108 contracts worth UAH 6.7 m. (20.5% of the total premium in the market) to insure crops on 72.2 hectares. The Ukrainian Agrarian Insurance Company sold 158 contracts worth UAH 16.6 m. (50.6%). This company concentrated heavily on selling winter crop coverage for the full production cycle (no deductible). The second group consists of the insurers with more modest outcomes. These are such companies as Aska, Oranta, Providna and TAS. All these companies managed to collect over UAH 1 m. each (UAH 7.4 m. in total or 22.6% of the total premium in the market). They sold 283 contracts (46 %) covering 77.800 hectares (38.2% of the total acreage insured). The third group consists of the companies who sold less than 30 contracts each in autumn 2011: Brokbusiness, Oranta-Sich, Universalna, UNIQA and PZU Ukraine. These companies collected less than UAH 1 m. (each) and insured crops on 32.300 hectares. 16 Agri-Insurance Market in Ukraine in 2012

Contracts Acreage insured, hectares Sum insured, UAH Premiums collected, UAH Indemnities paid, UAH Indemnity payments Contracts, % Premiums, % Acreage insured, % Indemnities paid, % Acreage affected, % Premium rate, % Loss ratio, % The insurers shares by a range of indicators Table 8 Indicator Group Group I 44 71 46 47 55 9.33 56 Group II 46 23 38 41 38 9.14 32 Group III 10 6 16 12 7 5.09 12 In autumn 2011, the average premium rate in the market was 8.12 % (determined by dividing the total premium collected by the total sum insured). At the same time, the mean premium rate by company was 6.97%. The difference is due to the large number of contracts insuring winter crops for the whole production cycle. The average premium rate for the UASK portfolio was 14.07% (i.e. by almost six percentage points higher than the average premium rate in the market). Table 9 Aggregated data by insurance company, autumn-winter 2011-2012 Indicator Insurer ASKA 90 31,189.89 20,127,858,38 2,551,826.95 1,022,022.97 27 Brokbusiness 5 2,777.70 8,574,316.79 512,472,.73 2,047,617.00 2 INGO Ukraine 108 72,170.52 146,865,460.35 6,738,481.85 10,110,578.81 28 Oranta 85 24,017.68 33,842,60,.83 2,180,270.95 8,077,603.83 40 Oranta-Sich 7 2,092.00 2,004,800.00 50,120.00 0.00 0 Providna 37 12,307.19 16,713,774.74 1,375,100.88 631,614.35 7 TAS 71 10,245.20 25,224,307.36 1,314,122.07 1,033,488.08 7 UASK 158 21,001.62 118,169,747.66 16,627,137.76 8,745,604.29 63 Universalna 3 1,025.00 2,624,663.00 216,934.78 0.00 0 UNIQA 29 18,446.10 20,630,526.89 811,639.63 734,597.22 13 PZU Ukraine 18 7,996.12 10,063,626.12 479,751.15 1,384,010.05 8 Total 611 203,269.02 404,841,686.12 32,857,858.75 33,787,136.60 195 The loss ratio for the winter crops insured in autumn 2011 was 67%. Importantly, the ratio significantly varies by company (from 0 to 400%). Of the 11 respondent companies, 4 17 Agri-Insurance Market in Ukraine in 2012

Acreage affected, hectares Acreage insured, hectares /contract Premium, UAH/contract Average premium rate,% Indemnities, UAH per hectare Loss ratio reported a loss ratio over 100%. These are the companies in the Groups I and II. Seven companies reported a loss ratio lower than the average one for this market. Key indictors by insurer Table 10 Indicator Insurer ASKA n/a 347 28,354 12.68 n/a 40 Brokbusiness 847.00 556 102,495 5.98 2,417 400 INGO Ukraine 7,001.22 668 62,393 4.59 1,444 150 Oranta 11,289.76 283 25,650 6.44 715 370 Oranta-Sich 0.00 299 7,160 2.50-0 Providna 581.65 333 37,165 8.23 1,086 46 TAS 1,429.00 144 18,509 5.21 723 79 UASK 5,823.32 133 105,235 14.07 1,502 53 Universalna 0.00 342 72,312 8.27-0 UNIQA n/a 636 27,988 3.93 n/a 91 PZU Ukraine 1,400.19 444 26,653 4.77 988 288 Average 2,431.62 333 53,777 8.12 1,191 103 The charts below demonstrate the shares of individual insurers with regard to the major indicators of the winter crop insurance. Chart 10 18 Agri-Insurance Market in Ukraine in 2012

The Ukrainian Agrarian Insurance Company (UASK) took the lead by amount of collected premiums. This company concentrated on selling the full cycle coverage (i.e. till harvest in the next year) and collected 50.6% of the total premiums in the market. INGO Ukraine collected 20.5% of the total premium. This company concentrated on insuring all eligible grain crops and vine lands. The shares of the two other leaders (ASKA and Oranta) were 7.8% and 6.6% respectively. Chart 11 The indemnity shares are significantly different from the other main indicators above. INGO Ukraine paid the highest indemnity (30%). The companies UASK and Oranta also paid a total indemnity higher than other companies (26% and 24% respectively). There were other several companies that paid substantial indemnities, such as Brokbusiness (6.1% of the total indemnity in the market), PZU Ukraine (4.1%), TAS (3.1%), UNIQA (2.2%) and Providna (1.9%). Chart 12 19 Agri-Insurance Market in Ukraine in 2012

Chart 13 Evidence suggests that agri-insurance developed in spite of the drought in autumn 2011. The insurance companies improved the quality of the services and, importantly, paid higher indemnities to the producers. The total indemnity paid in 2011 was twice as high as that in 2010. Consequently, the companies loss ratio increased. 20 Agri-Insurance Market in Ukraine in 2012

Contracts Acreage insured, hectares Sum insured, UAH Premiums, UAH Indemnities, UAH Crop Insurance in Spring-Autumn 2012 Background Throughout spring-summer 2012, the insurance companies signed 1,325 crop insurance contracts (1,981 contracts in 2011). The companies insured crops on some 524,000 hectares (540,000 hectares in 2011). The total insured sum was nearly UAH 3.06 b. (UAH 3.2 b. in 2011). The insurers collected the total premium worth UAH 97.6 m. (UAH 108 m. in 2011). The average premium rate was 3.19% i.e. lower than in 2011 (3.38%). The forward grain purchase program of the Agrarian Fund was one of the major factors contributing to the development of agri-insurance. All producers participating in the program were to insure the yield with one of the several accredited companies. The program required the producers to have real insurance coverage (which is often not the case when crops are insured as collateral). Table 11 Crop insurance in spring-summer 2012 by indicator Indicator Program Specified risks 57 43,335.18 159,754,241.73 966,912.81 0.00 Yield insurance against spring-summer risks IFC products of insurance against springsummer risks 1019 410,357.86 2,546,345,501.27 83,213,899.30 14,245,492.96 115 18,875.76 189,401,030.07 9,470,889.16 4,132,990.45 Crop yield index 25 10,350.94 67,423,254.33 2,359,813.91 950,000.00 Other programs 107 40,547.87 92,747,277.83 1,509,819.25 291,006.25 Perennial plantings (apple trees) 2 602 2,168,321.00 96,692.00 0.00 Total 1,325 524,069.61 3,057,839,626.23 97,618,026.43 19,619,489.66 Data by Crop The producers preferred to insure winter wheat (670contracts), sugar beets (178 contracts), corn (125 contracts), soya (93), sunflowers (85 contracts) and winter rye (79 contracts). One contract insured apple trees, and two contracts insured vine lands. Chart 14 below represents the share of each insured crop in the overall portfolio. 21 Agri-Insurance Market in Ukraine in 2012

Chart 14 The insured acreage under winter wheat was 353,000 hectares. The producers paid over UAH 55.3 m. under the contracts insuring winter wheat for the summer season. The corn insurance contracts covered some 42,400 hectares and provided for the premiums worth UAH 10.2 m. Chart 15 Sugar beets were insured on 20,200 hectares, and the insurers collected UAH 16.5 m. of premiums. The insured acreage under sunflowers was 42,400 hectares (only UAH 4 m. collected). 22 Agri-Insurance Market in Ukraine in 2012

Chart 16 The key crop data are given in the Table 12 below. Key data by crop Table 12 Crop Indicator Contracts Acreage, hectares Sum insured, UAH Premiums collected, UAH Winter wheat 670 353,392.19 1,969,007,560.19 55,373,009.73 Winter barley 15 3,430.74 14,631,799.14 250,596.65 Winter rye 79 14,515.23 43,361,263.90 1,512,860.24 Winter rapeseed 15 5,206.60 26,938,541.43 563,765.72 Spring wheat 2 171.00 657,206.40 17,942.02 Spring barley 40 9,523.82 21,312,403.39 521,062.87 Rye 17 5,194.79 17,287,841.47 265,011.84 Sugar beets 178 20,223.52 336,423,554.39 16,522,724.87 Sunflower 85 42,472.73 167,716,621.08 4,006,152.32 Soybeans 93 26,674.71 173,001,912.56 8,169,667.10 Vine lands 2 602.00 2,168,321.00 96,692.00 Garden 1 10.00 990,000.00 5,940.00 Corn 125 42,445.14 277,343,809.14 10,275,644.25 Spring mustard 1 98.00 334,245.37 23,464.02 Oats 1 59.00 283,200.00 1,132.80 Rice 1 50.14 600,000.00 12,360.00 Total 1,325 524,069.61 3,057,839,626.23 97,618,026.43 23 Agri-Insurance Market in Ukraine in 2012

The average premium rate for winter wheat was 2.81%. Sugar beets were insured at 4.9%, corn at 3.7%, sunflowers at 2.39% and soya at 4.72%. The insurance of spring mustard was most expensive (7.02%), however this figure hardly reflects the market situation for only one contract was sold. Data by Oblast The oblast of Poltava was the leader by the number of contracts sold in the spring-autumn 2012. Three hundred sixty nine contracts were signed there. The insured acreage was 64,000 hectares. The total premium amounted to UAH 31.2 m. or 32% of the total agriinsurance premiums in Ukraine. By number of contracts, the leaders were the Oblasts of Vinnytsya (115 contracts), Kharkiv (73), Dniepropetrovsk (69), Sumy (67), Kyiv (64), Chernigiv (62). In all other oblasts the number of contracts per oblast never exceeded 60. In addition to Poltava oblast, the largest insured acreages were in the oblasts of Lugansk (53,400 hectares), Vinnytsya (47,000) and Donetsk (43,800). The highest premiums were collected in the oblasts of Kharkiv (UAH 7.4 m.), Vinnytsya (UAH 7.1 m.), Lugansk (UAH 5.6 m.) and Donetsk ( UAH 5.5 m.). Table 13 Crop insurance by Oblast Indicator Oblast Crimea Autonomous Republic Contracts Total acreage, hectares Sum insured, UAH Premiums, UAH 23 7,781.89 70,530,233.80 1,494,069.47 Vinnytsya 115 47,064.38 258,556,097.64 7,197,256.54 Volyn 23 8,576.01 46,939,178.61 1,497,122.20 Dniepropetrovsk 69 30,705.38 114,246,884.65 1,919,768.69 Donetsk 47 43,899.55 207,156,702.88 5,570,393.56 Zhytomyr 50 14,845.96 76,807,113.08 2,423,952.85 Zakarpattya 4 1,272.00 5,532,521.00 214,439.00 Zaporizhzhya 28 24,485.61 138,380,217.04 3,585,487.50 Ivano-Frankivsk 18 3,478.86 22,546,192.71 789,116.74 Kyiv 64 23,344.46 133,711,730.65 2,928,366.96 Kirovograd 51 25,563.98 146,404,339.02 3,066,574.59 Lugansk 52 53,455.61 246,386,675.20 5,671,790.02 Lviv 18 11,390.66 68,674,970.42 2,428,566.30 Mykolaiv 21 9,027.80 29,097,997.08 900,201.23 Odesa 37 13,239.22 37,117,924.89 1,727,341.55 Poltava 369 64,064.93 657,046,663.34 31,252,286.85 Rivne 22 13,189.79 84,748,637.85 2,173,638.81 Sumy 67 18,408.02 82,533,463.34 2,568,153.17 24 Agri-Insurance Market in Ukraine in 2012

Ternopil 37 12,941.51 110,879,301.74 3,101,626.28 Kharkiv 73 26,213.62 186,030,674.68 7,446,138.70 Kherson 15 17,779.08 67,395,764.55 1,121,252.00 Khmel nytsk 32 16,135.82 75,079,880.63 2,233,309.08 Cherkassy 21 12,935.13 76,262,842.69 2,469,762.64 Chernivtsi 7 1,163.83 7,651,562.88 254,564.54 Chernigiv 62 23,106.51 108,122,055.86 3,582,847.17 Total 1,325 524,069.61 3,057,839,626.23 97,618,026.43 Chart 17 The average premium rate throughout the 2012 spring-autumn was 3.19%. At the same time, only in three oblasts the average rate per oblast was 4% or higher. Thus in Poltava oblast the average rate was 4.76% (4.65% in Odesa Oblast, 4 and 4% in Kharkiv Oblast). The lowest rates were applied in the oblasts of Kherson (1.66%) and Dniepropetrovsk (1.68%). The average contract insured 396 hectares. The average premium per acreage unit (hectare) was UAH 186. The lowest average premiums were paid in the oblasts of Dniepropetrovsk and Kherson (UAH 63/hectare). Agri-insurance was most costly in the oblasts of Poltava (UAH 488/hectare) and Kharkiv (284 UAH/hectare). The Table 14 below illustrates the other major indicators. 25 Agri-Insurance Market in Ukraine in 2012

Indicator Oblast Crimea Autonomous Republic Average rate, % Agri-insurance by Oblast Acreage, hectares/ contract Premium, UAH/contract Premium, UAH/hectare 2.12, 338 64960 192 Table 14 Indemnity, UAH 1,200,408.51 Vinnytsya 2.78, 409 62,585 153 0.00 Volyn 3.19, 373 65,092 175 0.00 Dniepropetrovsk 1.68, 445 27,823 63 5,033,484.75 Donetsk 2.69, 934 118,519 127 577,295.80 Zhytomyr 3.16, 297 48479 163 0.00 Zakarpattya 3.88, 318 53610 169 65.00 Zaporizhzhya 2.59, 874 128053 146 2,872,459.93 Ivano-Frankivsk 3.50, 193 43,840 227 0.00 Kyiv 2.19, 365 45756 125 0.00 Kirovograd 2.09, 501 60,129 120 0.00 Lugansk 2.30, 1028 109,073 106 981,884.48 Lviv 3.54, 633 134,920 213 109,469.31 Mykolaiv 3.09, 430 42,867 100 1,240,686.19 Odesa 4.65, 358 46,685 130 158,704.73 Poltava 4.76, 174 84,695 488 4,132,990.45 Rivne 2.56, 600 98,802 165 0.00 Sumy 3.11, 275 38,331 140 1,715,465.51 Ternopil 2.80, 350 83,828 240 0.00 Kharkiv 4.00, 359 102,002 284 407,715.65 Kherson 1.66, 1185 74750 63 1,031,496.84 Khmel nytsk 2.97, 504 69791 138 0.00 Cherkassy 3.24, 616 117608 191 0.00 Chernivtsi 3.33, 166 36366 219 0.00 Chernigiv 3.31, 373 57788 155 157,180.51 Average 3.19, 396 73674 186 х 26 Agri-Insurance Market in Ukraine in 2012

Chart 18 Data by Insurer According to the data provided by the insurance companies, 14 companies insured crops and perennial plantings in spring-summer 2012. Based on the available data, the insurers can be divided into three groups by number of contracts sold. The first group consists of the leader companies: Providna and Ukrainian Agrarian Insurance Company (UASK). Each of these companies sold over 300 contracts during the season. The UASK Company signed 490 contracts (44%) to insure crops on 92,000 hectares (17% of the total acreage insured in spring-autumn 2012). Providna sold 329 contracts (25%) to insure some 113,000 hectares (21%). The second group consists of the following companies: ASKA, Brokbusiness, Dominanta, Strakhovye Garantii, UNIQA and PZU Ukraine. Each of these companies sold from 35 to 70 contracts with the exceptions of PZU Ukraine and Strakhovye Garantii that sold 131 and 99 contracts respectively. The Company Brokbusiness collected UAH 9.6 m., that was more than any other company in the group, followed by ASKA and Dominanta (UAH 6.9 and 6 respectively). UNIQA collected premiums worth almost UAH 4 m., thus being the last company on the list. 27 Agri-Insurance Market in Ukraine in 2012

The Companies Strakhovye Garantii and Dominanta should be noted as the insurers who just entered this market and achieved significant success in a relatively short time. The third group consist of such companies as Oranta, Knyazha, INGO Ukraine, TAS Oranta-Sich and Universalna. Each of these companies sold 35 or less contracts and insured less than 10,000 hectares. Table 15 The insurers shares by a range of indicators Group Indicator Contracts, % Total sum insured per group, % Premiums collected, % Acreage insured, % Premium rate, % Group I 62 36 74 58 4,2 Group II 32 61 24 39 1,98 Group III 6 3 2 3 3,27 In spring-summer 2012, the average premium rate in the market was 3.19% (estimated as a quotient of the total premium value and total sum insured). The simple average of premium rate by company was 3%. The Table 16 below presents some key indicators per company. Aggregated data by insurance provider for spring-autumn 2012 Indicator Acreage, Sum insured, Premiums, Contracts hectares UAH UAH Company Table 16 Average premium rate ASKA 56 34,676.72 213,726,528.11 6,924,011.93 3.24 Brokbusiness 66 43,245.42 345,802,297.00 9,672,816.13 2.80 Dominanta 38 24,402.00 172,617,667.00 6,081,702.00 3.52 INGO Ukraine 6 3,038.43 24,199,043.58 768,243.90 3.17 Knyazha 25 7,910.20 45,481,163.93 1,093,668.93 2.40 Oranta 35 8,561.34 28,487,940.63 1,468,876.41 5.16 Oranta-Sich 4 1,045.00 1,670,700.00 30,050.00 1.80 Providna 329 113,729.28 647,892,329.99 22,630,649.83 3.49 Strakhovye Garantii 99 63,798.78 398,860,063.36 8,142,611.11 2.04 TAS 10 3,002.62 12,173,272.69 178,240.75 1.46 UASK 490 92,591.56 675,148,791.75 33,136,694.82 4.91 Universalna 2 451.00 683,728.50 35,024.07 5.12 UNIQA 34 31,493.90 206,393,203.42 3,925,327.70 1.90 PZU Ukraine 131 96,123.36 284,702,896.27 3,530,108.85 1.24 Total 1,325 524,069.61 3,057,839,626.23 97,618,026.43 3.19 28 Agri-Insurance Market in Ukraine in 2012

The charts below present the major indicators by company as percentages of the total portfolio indicators in the spring-autumn 2012. Chart 19 Chart 20 29 Agri-Insurance Market in Ukraine in 2012

Chart 21 Chart 22 Of the 14 respondent companies, only one had a loss ratio over 100%. This company was in the Group II. Six companies reached the end of the season without incurring any losses. 30 Agri-Insurance Market in Ukraine in 2012

Chart 23 The average loss ratio for the spring-autumn 2012 was 20%. It varies significantly by company from 0 to 105%. Considering low diversification of the most companies portfolios (by crop, region and insurance program) it is problematic to identify the reasons for high/low loss ratio of individual insurers. Table 17 Indemnities paid and loss ratios by company in spring-autumn, 2012 Company Indicator Acreage affected, hectares Indemnity payments Indemnity value, UAH Loss ratio,% ASKA n/a 8 1,460,984.03 21 Brokbusiness 3,099.10 1 0.00 0 Dominanata 740.54 3 1,296,225.51 21 INGO Ukraine 575.90 1 603,013.91 78 Knyazha 0.00 0 0.00 0 Oranta 734.00 5 1,258,001.43 86 Oranta-Sich 0.00 0 0.00 0 Providna 5,773.62 17 5,530,272.33 24 Strakhovye Garantii 0.00 0 0.00 0 TAS 0.00 0 0.00 0 UASK 1,290.31 12 4,146,145.35 13 Universalna 0.00 0 0.00 0 UNIQA 3,209.00 2 4,137,704.66 105 PZU Ukraine 1,872.39 3 1,187,142.44 34 Total 17,294.86 52 19,619,489.66 20 31 Agri-Insurance Market in Ukraine in 2012

Considering that the data were collected at the end of the season when some companies still adjusted losses and paid indemnities, the final data are expected to be available no earlier than the end of the 2013 first quarter. 32 Agri-Insurance Market in Ukraine in 2012

The IFC Agri-Insurance Development Project would like to thank the insurance companies who provided their data required to analyse in agri-insurance market in 2012, and the companies effectively informing the public of their services, which enabled us to incorporate their data into this report. About the The project implemented by International Finance Corporation (IFC) with financial support from the Canadian International Development Agency (CIDA) facilitates the development of the agri-insurance sector in Ukraine by working with the key regulatory, institutional and commercial partners. The project will help to improve the regulatory environment for agri-insurance, develop the capacity of insurance companies and work directly with farmers in a pilot implementation program. For more information, visit www.ifc.org/ukraine/ag-ins About IFC IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector. We help developing countries achieve sustainable growth by financing investment, mobilizing capital in international financial markets, and providing advisory services to businesses and governments. In FY12, our investments reached an all-time high of more than $20 billion, leveraging the power of the private sector to create jobs, spark innovation, and tackle the world s most pressing development challenges. For more information, visit www.ifc.org. About CIDA The Canadian International Development Agency (CIDA) is a government agency o support sustainable development in developing countries, in order to reduce poverty and to contribute to a more secure, equitable and prosperous world. One of its objectives is to work with countries in transition to stimulate growth through building self-sustainability among local population and mobilising available resources. CIDA supports foreign aid projects in many countries around the world. 33 Agri-Insurance Market in Ukraine in 2012