Law of Ukraine

“On Specifics of State-Supported Insurance of Agricultural Products”

Date of entry into force:
July 1, 2012

The Law regulates relations in the sphere of state-supported insurance of agricultural products in order to protect the property interests of agricultural producers, and is aimed at ensuring production stability in agriculture.

Article 1 of the Law provides definitions of terms used in it. For example, insurance agreement (standard state-supported agricultural products insurance agreement against agricultural production risks) is an insurance agreement concluded between the insurer and the insured – agricultural producer to insure agricultural products on the terms established by law. Standard insurance agreements are developed for each insurance product and/or each crop, and are approved by the central body of executive power that provides for creation and implements state agrarian policy, and the national commission carrying out regulation in the sphere of financial service markets. Insurance companies may only use standard insurance agreements in the scope of the program for state support for agricultural products insurance.

According to Article 3 of the Law, the main principles of state-supposed agricultural products insurance are:
  • supporting stability of the financial condition and creditworthiness of agricultural producers in case of loss (destruction, wastage) of insured property due to adverse natural climatic conditions or other adverse events determined in standard insurance agreements;
  • mandatory conclusion of the state-supposed agricultural products insurance agreement as a condition for providing agricultural producers with certain types of state support and subsidies, as determined by the Cabinet of Ministers of Ukraine;
  • equal access to state support for all agricultural producers irrespective of their organizational legal form;
  • ensuring compensation of losses incurred by the insured due to insured events, in the amount, according to the procedure, and on the terms established by the Law;
  • fulfilling Ukraine’s obligations in the sphere of international trade.

Article 4 of the Law establishes that the relationship parties in state-supported agricultural products insurance are insurers and the insured. Insurers are legal entities that hold an appropriate license and satisfy the requirements set by Article 15 of the Law.

According to Article 5 of the Law, the subject of a state-supported agricultural products insurance agreement are the property interests of the insured related to their insured events in respect of grown, fed, caught, harvested or produced primary (without secondary treatment and processing) agricultural products (goods) specified in UCC FEA groups 1-24 according to the Law of Ukraine “On the Customs Tariff of Ukraine”, specifically in respect of:
  • harvest of agricultural crops;
  • harvest of perennial plantations;
  • livestock, fowl, rabbits, fur game, bee colonies, fish and other living water resources, and animal products.
The following are not subject to state-supported insurance:
  • harvest of agricultural crops that were cultivated but did not yield harvest during three or more years;
  • harvest of perennial plantations of fertile age that did not yield fruit for the last five years;
  • ill livestock, fowl, rabbits, fur game, bee colonies, fish and other living water resources, and animal products, as well as those present in the quarantine area or in the area of an epizootic emergency.

An insured event is occurrence of a certain event provided for by the insurance agreement according to the provisions of the Law, which resulted in loss (wastage, damage) of insured crops (plantations), failure (shortfall, shortage) of insured harvest, beekeeping products, death (loss, forced slaughter, trauma or illness) of insured livestock, fowl, rabbits, fur game, bee colonies, fish and other living water resources, and animal products, and which creates an obligation with the insurer to pay out insurance compensation to the insurer (Article 6 of the Law). Loss of agricultural products is not considered an insured event if it resulted from:
  • events not provided for by the insurance agreement;
  • intentional acts of the insured;
  • crass violation of agrotechnical, sanitary, veterinary or other requirements by the insured, displayed in the insured’s failure to comply with the provisions of the insurance agreement on terms of carrying out appropriate measures according to the process card approved during the conclusion of agreement, which provides for specific agrotechnical rules and requirements in respect of the insured crop; or sanitary, veterinary or other requirements to agricultural work provided for by the insurance agreement and specified in standard insurance products.

Articles 7 and 8 of the Law determine the terms and specifics of insuring:
  • harvest of agricultural crops and perennial plantations;
  • livestock, fowl, rabbits, fur game, bee colonies, fish and other living water resources, and animal products.

The insured amount for harvest of agricultural crops and perennial plantations is established in the insurance agreement on the basis of the insurable value of the future harvest and the level of insurance coverage. The insured amount for livestock, fowl, rabbits, fur game, bee colonies, fish and other living water resources, and animal products is established in the insurance agreement on the basis of their insurable value (Article 9 of the Law).

According to Article 10 of the Law, the insurance payment (insurance premium) is established in the insurance agreement between the insurer and the insured as multiplication of the insured amount and the insurance tariff determined for each type of agricultural property, with adherence to the provisions of the Law. The marginal values, structure and procedure for applying insurance tariffs for different types of insurable property and for different regions of Ukraine is determined by the central body of executive power that providing for creation and implements state agricultural policy, on the basis of actuary calculations, together with the Agrarian Insurance Pool (hereinafter referred to as “Pool”).

Articles 11 and 12 of the Law establish the procedure for determining losses in case of an insurance event for:
  • insurance of harvest;
  • insurance of livestock, fowl, rabbits, fur game, bee colonies, fish and other living water resources, and animal products.

The procedure for notifying of an insurance event and for preparing the insurance protocol is envisaged in Article 13 of the Law.

Within 14 days after the insurance protocol is signed, the insurer shall pay insurance compensation to the insured. For each day of delay in payment of insurance compensation, the insurer shall pay the insured a fine in the amount established by law. If the insurance compensation is established on the basis of a court resolution, the insurer shall pay the compensation on the basis of a court resolution that has taken effect. The amount of insurance compensation is set in the amount of losses, but may not exceed the insured amount (Article 14 of the Law).

According to Article 15 of the Law, licenses for agricultural products insurance are issued by the national commission carrying out regulation in the sphere of financial service markets. The right to insure agricultural products with state support is granted to insurers that satisfy the requirements of the Law of Ukraine “On Insurance”, received the license to provide appropriate insurance, and are members of the Pool. Insurers that provide state-supported agricultural products insurance create a catastrophe cover fund by deducting a maximum of 5 percent of insurance payments (insurance premiums) to it. The procedure and terms for reinsuring agricultural products by insurers that provide state-supported agricultural products insurance are set in the standard reinsurance agreement.

The Agrarian Insurance Pool is a single association of insurers that provide insurance according to the Law. Participation in the Pool is the condition under which insurers can provide state-supported agricultural products insurance. The Pool is a legal entity and a non-profit organization which operates according to the Law, the legislation of Ukraine and its Charter. The Charter of the Pool is approved by the meeting of the Pool founders (members) and registered according to the requirements of the legislation. The Pool may not act as a founder or co-founder of legal entities that carry out business activity and/or have an objective of generating profit. The work of the Pool is financed at the expense of its members. A member of the Pool can be an insurer which satisfies the requirements of the Law of Ukraine “On Insurance”, procured an appropriate license, and satisfies the requirements regarding participation of insurance companies in state-supported agricultural products insurance, as determined by the national commission carrying out regulation in the sphere of financial service markets, together with the central body of executive power that provides for creation and implements state agrarian policy. Systematic violation of the terms of payment of insurance compensation constitutes grounds to expel an insurer from the Pool (Article 16 of the Law).

The functions and tasks of the Agrarian Insurance Pool are determined by Article 17 of the Law.

To ensure fulfillment of obligations before insured persons, the Pool creates a catastrophe cover fund. The sources of the catastrophe cover fund are deductions from insurance premiums received by the Pool members for the appropriate type of insurance, in the amount determined by the Coordinating Board of the Pool, but not exceeding 5 percent. The fund resources are used in case of occurrence of catastrophe risks, by decision of the Coordinating Board of the Pool. In case an emergency of catastrophic proportions occurs, and the resources of the catastrophe cover fund are insufficient, the state, acting through the central body of executive power that provides for creation and implements state agrarian policy, provides the Pool with a budget loan, the procedure for granting and use of which is approved by the Cabinet of Ministers of Ukraine. The Pool may create other insurance funds as determined in the Pool’s Charter (Article 18 of the Law).

Article 19 of the Law envisages that the managing and controlling bodies of the Pool are:
  • meeting of the Pool shareholders;
  • Coordinating Board of the Pool;
  • other bodies determined by the Pool’s Charter.

The procedure for concluding an insurance agreement is established by Article 21 of the Law.

According to Article 22 of the Law, a state-supposed agricultural products insurance agreement, in addition to the terms established by the Law of Ukraine “On Insurance” must contain the following:
  • cadastre number and area of land plots covered by insured crops, or their GPS coordinates – for insurance of crops;
  • type, breed, sanitary and veterinary condition, identification number (if available) of animals – for insurance of livestock;
  • type, classification, farming conditions and yield parameters of living water resources – for insurance of living water resources;
  • number of bee colonies in hives, their productivity, keeping conditions – for insurance in beekeeping;
  • forecasted volume of products (yield), in kind and in monetary terms, and prices used to calculate the insurable value of products;
  • insurance cover level;
  • main agrotechnical and technological measures that the insured shall be carrying out;
  • procedure for determining the insurance compensation amount.

The insurer’s liability under an insurance agreement starts on the day when the insurance payment is made, but not before the date stated in the agreement. The term of validity of the insurance agreement for agricultural products ends on the last day of harvesting and removal of harvest from field. The term of validity of the insurance agreement for livestock, fowl, rabbits, fur game, bee colonies, fish and other living water resources, and animal products ends on the last day of the agreement term, on the day of loss (wastage, forced slaughter, forced destruction, trauma or illness) of insured livestock, fowl, rabbits, fur game, bee colonies, fish and other living water resources, and animal products. If an insurance event occurs during the insurance period, the insured must inform the insurer about it, as well as inform about harvesting, slaughter of livestock, fishing, collecting beekeeping products, or receiving other animal products, no later than 10 days before the planned beginning of such work. An insurance agreement based on which insurance compensation is paid partially is effective until the end of the term set in it, within the amount of difference between the insured amount and the paid insurance compensation (Article 23 of the Law).

Article 25 of the Law envisages that state support for insurance of agricultural products entails granting monetary funds from the state budget to agricultural producers, as subsidies to compensate for a portion of the insurance payment (insurance premium) actually paid by them under agricultural products insurance agreements, according to the procedure determined by the Law. The list of agricultural insurance risks and insured objects, and the portion of insurance payments (insurance premiums) subsidized from the state budget is determined by the Cabinet of Ministers of Ukraine by suggestion of the central body of executive power that provides for creation and implements state agrarian policy.

The procedure for granting financial support is established by Article 26 of the Law.

The Law also introduces appropriate amendments to the Laws of Ukraine “On Insurance” and “On State Support of Agriculture in Ukraine”.
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