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					Annex 28. Fact Sheet Turkey

1. Overview of Turkish Agriculture
       In this section, the agricultural structure has been described and a comparison with
the EU agriculture has been made regarding the main figures. For the history of agricultural
insurance in Turkey, see section 9.

   1.1. Agricultural Structure in Turkey

        Owing to differing climate and soil conditions over a large area Turkey has a wide
range of agricultural product variety. However, the great potential owned can not be exploited
adequately. Bellow, in the Table 1.2, data from the Agricultural Census of 2001 are given. As
it can be observed, 18.43 million hectares are cultivated by approximately three millions of
farm households. Of these farms, in about 42.9% irrigated agriculture is practiced, a figure
accounting for 19% of the total cultivated area. When the farm sizes are examined, it is
observed that of the total number of the farms 64.8% are those smaller than 5 hectares,
while 29.4% are between 5 and 20 hectares and only 5.8% are bigger than 30 hectares.
        When the distribution of area cultivated by farm scale groups is examined, the
unfavorable structure becomes evident. The small scale farms accounting for about 64.8% of
the total number of farms use only 21.3% of the total area cultivated, while the big scale
farms accounting for 5.8% of the total number of farms use 34.2% of the total area cultivated.
These data reflect that small and medium size farms dominate Turkish agriculture.


Table 1.2 Agricultural Structure in Turkey (2001)
                             Number of Farms                               Area Cultivated
  Farm Size                   Share    Share of farms with                 Share     Share of area with
                  Number                                       Area (da)
                               (%)    irrigated farming (%)                 (%)    irrigated farming (%)

 Small (5<Ha)    1,958,281    64.8             43.9           39,331,138   21.3              21.5

Mean (5-20 Ha)    887,328     29.4             40.9           82,004,847   44.5              18.0

 Big (20 Ha +)    175,598      5.8             41.8           62,993,516   34.2              18.8

     Total       3,021,207    100.0            42.9           184,329,501 100.0              19.0

Source: TURKSTAT, SPO



       In Table 1.3, some other data on the agricultural structure of Turkey are presented.
Figures show that, the number of animals, other than laying hens, has decreased in last 14
years. Accordingly, meat production has reduced, while milk production have increased only
to a small extend.



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Table 1.3 Number of Animals and Production of Animal Products in Turkey
Indicators                                 1990                    2003

Cows (heads)                                11,770,000               9,788,102

Sheeps (heads)                              40,553,000              25,431,539

Goats (heads)                               10,977,000               6,516,088

Chickens (units)                            96,676,000             277,532,596

Milk production (tons)                       9,617,415              10,611,011

Meat Production (tons)                         506,995                 366,962

Source: TURKSTAT



       When evolution of input use is considered, during the study period, a serious growth
has taken place in the number of tractors. Nevertheless, use of other capital intensive inputs
required for highly productive agriculture such as certificated seeds has increased
unsatisfactorily.
      In brief, structure of the agricultural sector in Turkey represents quite an unfavorable
prospect and the situation is worsening over time.

    1.2. Comparison of the agricultural structure in Turkey and in the EU

        A comparison of agricultural sectors in Turkey and in the EU (EU-15) (EU-25) is
thought to be of assistance in order to better evaluate the state of the sector in Turkey. As
can be inferred from Table 1.4, employment in agriculture in Turkey is near that of the EU-15.
The proportion of agricultural production value in GDP in Turkey is 11.5 percent while it is
only 1.6 both in EU-15 and in EU-25. The share of agriculture in exports of Turkey is also
noteworthy compared to both groups. These data reveal the proportional importance of
agriculture in Turkey compared to EU countries.
        On the other hand, there exist several structural problems in Turkish agriculture,
which poses serious questions on the compatibility of the sector in to the European market.
While the number of farms in Turkey is about half of that of the EU-15, average farm size in
Turkey is only one third of that in the EU-15. Besides that very small farms dominate Turkish
agricultural structure, the fact that employment level per farm is significantly higher than that
in the EU (1 person per farm in EU, 2.3 employees per farm in Turkey) causes the production
value per capita, in other words, labor productivity to be much lower. While the value of
production per farmer is €4,055 in Turkey, it is 44,153 in EU-15 and €30,967 in EU-25.
        In Turkey, the yields of animal products per head, such as milk and meat are also
quite lower than that in the EU. A similar situation is also present for the soil fertility of most
of the plant crops. All these data reveals little competitive power of Turkish farmer against
their European counterparts.




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Table 1.4: Comparison of Some Agricultural Indicators in Turkey and in the EU (2003)
Indicators                                                           Turkey       EU-15      EU-25

Total Area (km2)                                                     769,604 3,234,627 3,973,200

Arable Land (1000 ha)                                                  26,578     130,004    163,479

Irrigated Agricultural Area (1000 ha) (data for the year 2002)          5,215      13,101     25,220

Number of Farms (1000)                                                  3,021       6,771             ...

Average Farm Size (ha)                                                    6.1        18.7             ...

Average Organic Farm Size (ha)                                                7        34         34

Population (1000)                                                      69,884     379,483    453,683

Employment in Agriculture (1000)                                        6,165       6,487     10,082

Agricultural Production Value (Million Euros)                          24,996     286,418    312,209

Share of Agriculture in GDP (%)                                          11.5         1.6         1.6

Per capita Value of Production in Agriculture (Euros)                   4,055      44,153     30,967

Employees per farm (individuals)                                          2.3         1.0         1.0

Share of Agriculture in Total Exports (%)                                10.3         6.2         6.5

Share of Agriculture in Total Imports (%)                                 6.1         6.2         6.4

Foreign Trade Balance of Agricultural Products (Million Euros)            641       6,422      4,887

Transfers to Agriculture (Million Euros)                                2,032      47,903             --

Transfers per farmer (Euros)                                              330       7,384             --

Fertilizer consumption (1000 tons)                                      1,743      14,846     21,872

Number of cows (1000 heads)                                             9,788      78,472     88,704

Number of Sheeps (1000 heads)                                          25,431      87,674     89,984

Number of Goats (1000 heads)                                            6,516      11,873     12,517

Yield for milk (kg/head)                                                1,888       6,235      5,889

Yield for cow meat (kg/head)                                              183        316              --

Yield for wheat (kg/da)                                                   209        614         593

Yield for maize (kg/da)                                                   501        762         662

Source: TURKSTAT, MARA



        Along with these structural difference s, a significant disparity in agricultural subsidies
strikes attention. The subsidies to agriculture in the EU amount to 22 times the subsidies in
Turkey. Nevertheless, the amounts of the per-farmer subsidies in Turkey and in the EU-15
are €330 and €7,384 respectively. When these figures are analyzed together with the
production values per farmer, it is seen that the Turkish farmer is subsidized up to 8.1% of
his contribution to the production; while this figure is 16.7% in the EU-15.



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       From the data given above, it may be inferred that the Turkish agriculture had a
strong potential; however, with little competitive power. This structure, together with relatively
low agricultural subsidies, extremely deficient investments on rural infrastructure and low
educational level of the farmers, disclose the difficulties facing the Turkish agriculture both in
harmonization to EU and in global competition.
        Under these circumstances, on the way to the EU harmonization, agricultural
structure stands as much an important dimension as the legal and the institutional
harmonization processes. Because, the Turkish agriculture should be restructured on three
dimensions: the system, the structure and the process of production. This would be a
process which involves long time, substantial resources and intensive efforts.


2. General Framework:

        2.1. Definitions of disaster (for the application of article 92.2 of the
             Treaty of Rome1 )

Among “The Definitions to be Used Within the Scope of the State Subsidized
Agricultural Insurances”, “Natural Disaster” is defined as “Land movements and wheather
events such as hail, flood, earthquakes, extreme heat changes, drought, avalanche,
landslide, storms, whirlwind tornadoes, etc., which negatively influance the production
without human factor interference”.
Also within the third section of the Agricultural Insurance Law (5363), which deals with the
risks to be covered by the Pool, it is stated that, the Coverage for losses caused by drought,
hail, flood, storms, whirlwind tornadoes, earthquakes, fire, accidents, pests and animal
diseases for crops, greenhouses, agricultural buildings, agricultural machinery and livestock
and/or other risks considered as important for agriculture shall be determined by the Council
of the Ministers upon the proposals of the Committee.
In the Article 1 of the “Law on the Aid to Farmers Affected By Natural Disasters” (Law
number 2090, 1977), the aim of the Law is defined as follows:
The aim of this Law is to determine procedures and basis related with required aids and
technical supports to be given by Government to farmers and agricultural production
cooperatives whose farms, agricultural products, livelihood stocks, and production means
and facilities are damaged or completely vanished because of fire, earthquake, landslide,
storm, flood, frost, hail, drought, pests and diseases etc., and whose working and production
conditions are collapsed to a significant degree.




1
    The following shall be compatible with the common market:
    o (a) ……
    o    (b) aid to make good the damage caused by natural disasters or other exceptional occurrences;


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In the 2nd article of the same Law (2090), “a significant collapse in the working and production
conditions” is described as:
A) 40% (in terms of value) damage on products, production factors and facilities, no other
agricultural and other income to compansate for this loss and no posibility to barrow from
money landing banks, cooperatives and other suchj institutions,
B) In the case that less than 40% of production, production factors or facilities are damaged,
no possibility to barrow credit, no other income sources, thus, no ability to continue his
agricultural activity and to survive.



   2.2. General Law framework


The legislation in the area of agricultural insurances includes:


   •   The Agricultural Insurance Law number 5363, enacted on the 14th June 2006,
   •   Codes (Bylaw) of Practice for Agricultural Insurances,
   •   Bylaw on the Operation Methods and Rules of the Agricultural Insurance Pool,
   •   General and Technical Conditions for crop-greenhouse-animal life and poultry
       life insurances,
   •   Tariffs, instructions and exemptions (franchise),
   •   Description of the terms used within the Law.


Agricultural Insurance Law


Law Number         : 5363
Date of approval : 06/14/2005
Official Journal   : Date: 6/21/2005, No: 25852


The Agricultural Insurance Law consists of four sections. In the first section, the aim, the
coverage and the definitions of the terms are given under three corresponding articles. The
second section describes the establishment, tasks, authority and responsibilities of the
Board, the Company and the Ministry; resources of the Pool and uses to be made from those
resources; and the audit system. In the third section, risks, insurance contracts, participation
in the pool, reinsurance, aids and subsidies are dealt with. Under this section, the risks to be
guarantied by the Pool; State premium subsidies; arrangement of the insurance contracts
and the insurance companies’ and the state’s participation in the pool; reinsurance
arrangements; State subsidy for excessive loss; and cancellation of the aids and debt
postponement in case of no insurance contract are explained. The corresponding Article 17


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states that “the farmers who do not buy agricultural insurance will not be able to benefit from
the ex-law with number 2090 concerning the disaster aid by State”. Finally, in section four,
provisional and final rules concerning the publication of the related bylaws and codes, and
enforcement are aligned.


Codes (Bylaw) of Practice for Agricultural Insurances


Official Journal : Date: 05/18/2006, No: 26172


The Bylaw of Practice for Agricultural Insurance consists of three sections. In the fist section,
the aim, coverage, basis and the definitions relating to the Bylaw are given. The second
section in dedicated to the rules of insurance contracts. Under this section, the insurance
companies’ responsibility to issue and present a policy to the customer; and to provide them
with throughout information; rules concerning the tariffs and instructions; and the
responsibilities of the insurance companies to enable the data to the Central Data Base are
detailed by corresponding four articles. Finally, in section three, miscellaneous and final rules
concerning the enforcement of the Bylaw are aligned. With the publication of this Bylaw, the
Bylaw of Practice for Agricultural Insurance of the 22nd of September 2005 has been
repealed.


Bylaw on the Operation Methods and Rules of the Agricultural Insurance Pool


Official Journal : Date: 05/18/2006, No: 26172


The Bylaw on the Operation Methods and Rules of the Agricultural Insurance Pool consists
of six sections. In the first section, the aim, coverage, basis and the definitions relating to the
Bylaw are given. The second section describes the establishment, tasks, competence and
responsibilities of the Pool and the Board. Under this section, resources of the Pool and uses
to be made from those resources; rules of the reunions of the Board; duration of the Board
membership; fees to be paid to Board members are also set. Under the subsequent third
section, tasks, competence and responsibilities of the Company and the participating
Insurance Companies are laid down. Under this section, essentials of the founding charter of
the Company; organizational structure of the board of directors; conditions for the ownership
of the Companies’ papers; operating cost to be paid to the Company by the Pool, activity
reports and financial tables to be presented to the Ministry and the General Secretariat by
the Company; principles concerning the Companies’ actions in managing the Pools
investments and the buying operations; principles relating to the reinsurance and
retrocession agreements are elucidated. The forth section is allocated to the risks and the
loss appraisal process. Risks to be guarantied by the Pool and education and the status of
the experts working for the Pool are detailed in this section. Under the fifth section, tasks to
be handled by and the rights of the Ministry and the principles to be followed on the subject
of the State Aid are aligned. Accordingly, subsidies by the State are arranged for under two
different articles: one with reference to the premium subsidy; and the other concerning


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reinsurance guaranty for the case of excessive loss. Annulation of the disaster aid funds for
those risks included within the scope of the Bylaw is also made clear under this section. In
the sixth and the last section, miscellaneous and final rules concerning the enforcement of
the Bylaw are aligned. The Ministries’ and the General Secretariats’ authority to control the
system; and to make necessary arrangements to enable the application of the Bylaw are
mentioned in corresponding articles under this section. With the publication of this Bylaw, the
Bylaw on the Operation Methods and Rules of the Agricultural Insurance Pool of the 22nd of
September 2005 has been repealed.


Some Details of the:
- General and Technical Conditions for crop-greenhouse-animal life and poultry life
insurances,
- Tariffs, instructions and exemptions (franchise),
and some of the:
- Description of the terms used within the Law
are given under the related sections.


Bellow is a draft translation of the new Law of Agricultural Insurances, number 5363, of the
14th of June 2005.



                               AGRICULTURAL INSURANCE LAW*

Law No: 5363
Approval Date: 14/06/2005
Official Journal Date: 21/06/2005
Official Journal Law: 25852




SECTION 1 : Objective, Scope and Definitions


Objective
Article 1- The aim of this Law is to determine the procedures and principles regarding the
implementation of agricultural insurance in order to compensate farmers for losses occurring due to
the risks set out in the Law.


Scope
Article 2- This Law comprise the principals and procedures related to the establishment of the Pool,
risks to be covered by the Pool, income and expenditures of the Pool, subsidies for premiums and
support for damages exceeding the premium, insurance contract, provision of reinsurance and the
duties, competence and responsibilities, contribution and participation of the insurance companies.



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Definitions:
Article 3- For the purposes of this Law, the following definitions shall apply:

•“ministry” means Ministry of Agriculture and Rural Affairs,
•“undersecretariat” means Undersecretariat of Treasury,
•“insurance company” means insurance companies established in the framework of Insurance Control
Law no.7397 and having a license in agricultural insurance,

•“producer” means real and legal persons dealing with plant and animal production,
•“agricultural insurance” means insurance set out in the articles from 1316 to1319 of Turkish Trade
Law no.6762 and insurance included in this Law,

•“pool” means Agricultural Insurance Pool,
•“company” means company undertaking the operation of the Pool,
•“committee” means Management Committee of Agricultural Insurance Pool,
•“livestock” means ovine-bovine animals, poultry animals and aqua culture products.



SECTION 2: Establishment, Task, Competence and Responsibilities


Pool
Article 4- Pool has been establish to cover the risks in the scope of this Law, to determine the
standard insurance policies, to make loss organizations, actuarial studies, indemnification payments,
to provide reinsurance coverage, to improve, to extend and to monitor and to agricultural insurance, to
carry out the other technical services.
Pool is authorized for insuring, reinsurance and retrocession for the risks included in the scope.
Insurance companies are obliged to transfer all the premiums they obtain from agricultural insurance
in the scope of this Law, to the Pool. For the transferred premiums to the Pool by the insurance
companies, they are paid commission on the amount collected by the Pool. The premiums not
transferred in due time to the Pool by the insurance companies, are collected according to the
provisions of the Public Debt Collection Procedure Law no 6183.
Pool is managed by the Company mentioned in Article 9, according to the procedures to be set out in
the regulation issued jointly by the Ministry and Undersecreteriat.
Headquarter of the Pool is İstanbul. Pool is not subject to Public Financial Management and Control
Law no. 5018 and Public Procurement Law no. 4734 in respect to its activities in the scope of this
Law.


Committee
Article 5- Committee consists of 7 members, 2 from Ministry of Agriculture and Rural Affairs,
Undersecretariat of the Treasury each, 1from Association of the Insurance and Reinsurance


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Companies, Union of the Turkish Chambers of Agriculture and Operating Company of the Pool –
TARSIM each.

Committee members to be selected among the civil servants shall be required to have at least ten
years of service to public. Representative of Ministry shall have knowledge and experience in
agriculture and representative of Undersecreteriat, in insurance business. Other members shall be
required to have at least ten years of related professional experience in their own area and be met the
requirements in the subparagraphs (1),(4),(5),(6) and (7) of paragraph (A) in Article 48 of State
Employee Law no 657. One of the representatives from the Ministry shall be the natural chairman of
the committee.

Committee shall meet with at least five members and shall decide with vote of the majority. In the case
of equality in voting, chairman’s vote shall be counted as two.



Committee members shall be on duty for three years. Members may be appointed again after their
duty period. Membership shall end when a member leaves the institution he/she represents or is
withdrawn by his/her institution. In such a case new members shall complete the rest of the duty
period instead of these members.

Committee members holding public office shall be paid charge counted by multiplying (2000) indicator
figure with monthly coefficient, being implemented to public officers, for each meeting in one month.
Monthly coefficient shall be multiplied with (3000) indicator figure for committee members not holding
public office. This charge shall be paid maximum four times in a month.

Company shall conduct the implementation of the decision the committee taken and secretariat
services.



Duties and Responsibilities of the Committee
Article 6: The tasks of the Committee are:

    •   To determine the implementation essentials regarding the operating of the Pool

    •   To conduct studies to determine the premium subsidy ratio to be given in the scope of this
        Law for agricultural insurances based on product, risk and region, without exceeding the total
        State premium subsidy and to submit this study to the Ministry.

    •   To identify the problems faced at implementation and to work in order to solve these problems

    •   To decide service procurement

    •   To determine principal and procedures related to the loss assessment

    •   To make contracts with the insurance companies willing to be involved in agricultural
        insurance in the scope of this Law.

    •   To make contract on working principals and procedures with the operating company of the
        Pool



Sources of the Pool:
Article 7: The incomes of the Pool are as follows:



                                                                                                  677
    1. Premiums transferred by the insurance companies
    2. Premium subsidy provided by State
    3. Investment revenues of the collected sources
    4. Credits
    5. Contributions from the general budget
    6. Other incomes



Effective Areas of Pool Sources
Article 8: Expenditures of the Pool are as follows:
    a) Coverage payments related to agricultural insurances
    b) Management and operating cost of the Pool
    c) Payments regarding to protection provided from reinsurance, capital and similar markets
    d) Commissions to be paid to insurance companies
    e) Payments regarding the Informing and Introduction Campaigns
    f)   Payments regarding to assessment of loss
    g) Principal and interest payments of the credits taken
    h) Other payments for the purpose of this Law
    i)   Operating cost to be paid to operating company of the Pool.


Company
Article 9 - All works and operations related to the management of the Pool shall be carried out by the
Company to be established as a corporation with the equal shares of participating insurance
companies in the Pool.


The duties of the Company in the framework of the procedures and principles to be determined
by the Management Committee are as follows:
a) To ensure the payment of indemnifications as soon as possible by carrying out all kinds of works
and organizations for assessment of loss on which the indemnifications are based.

Assessment of loss for crop insurance shall be conducted by agriculture engineers and agriculture
technicians; risk examinations of livestock insurance shall be conducted by veterinarians and
agriculture engineers (zoo technician), loss assessment for livestock shall be conducted by
veterinarians.

Agriculture engineers and veterinarians shall be primarily drawn upon in assessment of loss.

b) To carry 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.

c) Implementation of the decisions taken by the Management Committee and to fulfill the secretarial



                                                                                                 678
works of the Pool.

d) Collection of the premiums, payment of indemnifications and to carry out similar kind of works.

e) To inform producers regarding agricultural insurance and to carry out public relations and publicity
campaigns.

f) To produce statistics about agricultural insurance in the framework of general provisions and to
prepare reports about this issue for the Management Committee.

g) To direct resources of the Pool for investment in the framework of determined principles and
provisions

h) To make suggestions to the Management Committee in necessary cases in order to carry out Pool
works properly.

ı) To carry out all other works and operations related to the management of the Pool.


The Company may not buy a property, except its own needs, by using the Pool sources; it uses its
sources for investment primarily by Treasury bond and public bond.
The Company shall be responsible for carrying out Pool works properly for the benefit of the Pool to
the Ministry, the Undersecretariat and the Management Committee. The Company shall monitor
incomes and expenditures of the Pool, all accounts and transactions with special and separate
records.
The Company may not disclose information obtained from its duties in the scope of this Law to third
parties for any reason. It shall be necessary to keep correspondences and documents of the Pool
properly. In cases of putting an end to activities of the Company, liquidation of the Company or the
Company’s bankruptcy, the Company shall continue to fulfill its duties until the Committee sings a
contract with a new company. In this case, it shall be necessary to return all information and
documents in the scope of the Law to the Committee.
The Company may not be involved in any other businesses, except the duties determined in this Law.


Duties and Responsibilities of the Ministry
Article 10 – Duties and responsibilities of the Ministry in the scope of this Law are as follows:
a) To take necessary measures to develop and expand agricultural insurance.
b) To submit proposals for approval to the Council of Ministers regarding premium subsidies on the
basis of crops, risks and regions.
c) To monitor regular and proper payments of indemnities
d) To fulfill other duties assigned by this Law.


Inspection
Article 11 – Inspection of the Pool and the Company in terms of insurance implementations shall be
conducted by the Undersecretariat and other inspections shall be conducted by the Ministry.




                                                                                                     679
SECTION 3: Risks, Insurance Contracts, Participation to the Pool, Reinsurance, Aid and
Subsidies


Risks to be covered by the Pool
Article 12 – Coverage for losses caused by drought, hail, flood, storms, whirlwind tornadoes,
earthquakes, fire, accidents, pests and animal diseases for crops, greenhouses, agricultural buildings,
agricultural machinery and livestock and/or other risks considered as important for agriculture shall be
determined by the Council of the Ministers upon the proposals of the Committee.


Premium Subsidy
Article 13 - The amount of premium subsidy shall be determined by the Council of the Ministers
annually upon the proposal of the Ministry on the basis of crops, risks, regions and farm size.
By the budget law, allocation of premiums shall take place in the Ministry budget every year. The
Ministry shall check premium amounts to be transferred to the Pool by the insurance companies with
farmer registration records and estimate premium subsidy and transfer to the Pool immediately.


Insurance Contract and Participation to the Pool
Article 14 – Insurance companies shall make agricultural insurance contracts with farmers in one’s
name and transfer whole of premiums and risks to the Pool. Insurance contracts shall be made
according to the standard policies determined by the Pool.
The Pool shall be authorized for the retrocession of risks taken over by it. Insurance companies shall
inform the Company about their retrocession demands for the following year no later than 1 November
of the present year. In case that there shall not be sufficient retrocession coverage according to the
losses estimated by the Pool, the Government shall participate for the rests. In case that the shares of
insurance companies exceeds 100%, there shall occur pro rata reduction in the shares of insurance
companies until the total rate decreases to 100%.


Reinsurance
Article 15 – The Company may make reinsurance contracts with domestic and foreign companies and
institutions on behalf of the Pool for the purpose of transferring the risks undertaken by the Pool, in
order to provide protection from national and international insurance, reinsurance, capital and similar
markets at sufficient level and in accordance with insurance techniques.


Support for damages exceeding the premium
Article 16 – In case that the protection provided from national and international market is considered
as insufficient, the part to be determined by the Council of Ministers shall be committed by the
Government.


Postponing Aid and Debt
Article 17 – 20/06/1977 dated and 2090 numbered Law shall not be applied to farmers who do not
have agricultural insurance for the risks of implementation year under the scope of this Law.



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SECTION 4: Temporary and Last Provisions
Regulation
Article 18 – Working procedures and principles of the Pool shall be regulated in the Regulation issued
by the Ministry by taking the Undersecretariat’s opinion; principles of insurance contracts shall be
regulated in the Regulation issued by the Undersecretariat in two months following this Law’s coming
into force.
Temporary Provision 1 – The Ministry shall be informed about the members to be appointed to the
Committee by the related institutions and appoint these members no later than in three months
following this Law’s coming into force.
The Company shall be established no later than in three months following this Law’s publication date.


Article 19 – Article 4 of this Law shall enter into force three months after its publication and other
articles shall enter into force on the publication date.


Operation
Article 20 – Council of Ministers shall put the provisions of this Law into operation.


*Draft translation of the original Law. For informative use only.




    2.3. Objectives of the existing policies/programs

Agricultural insurance markets were underdeveloped because of the lack of farm credit. The fact that
small farmers in Turkey did not have enough collateral to obtain low-interest agricultural credit used
to reduce their ability to invest in farming and hence their demand for agricultural insurance. The
government has taken up the responsibility of preparing a regulatory framework to facilitate the
growth of the insurance market. A draft law was prepared in 2002 to promote the development of
agricultural insurance system. (Turkish Competition Authority, 2003; TZOB, 2004).

Source: Oskam et al., 2004




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Please, refer to the original Fact Sheet for further information about this subsection, on:
- Agricultural Reform Implementation Project (ARIP) and Agricultural Insurance
- Agricultural Insurance in the 9th Five Year Plan
- Agricultural Insurance in the Annual Program of the Year 2006
- Agricultural Insurance and the Agricultural Strategy 2006-2010



    2.4. Law barriers: does the law forbid that ad-hoc measures or
         disaster funds compensate damages that could have been
         insured?

In the Section 3 of the Agricultural Insurance Law, number 5363, Article 17 under the
title of “Postponing Aid and Debt” states that:

– 20/06/1977 dated and 2090 numbered Law (Law on disaster aid) shall not be applied to
farmers who do not have agricultural insurance for the risks of implementation year under the
scope of this Law.
Currently there exists no other disaster aid program than that of 2090 by the State.

3. Market conditions
•               Competition on prices. Is there an independent body that fixes tariffs?

Formerly, the insurance companies were free to determine premium rates. Therefore there
was intensive price competition. Between 1993 and 2003, the TSRSB, with the contribution
by the TSV, have carried out various projects in order to determine minimum prices (as tariffs
in percentages) per products and regions. Along this period, they have renewed the price list
as far as the data base regarding the risks have enlarged. They have called the insurance
companies to respect these minimums, and to determine their premium rates equal or above
them. Nevertheless, many times, because of the lack of standardized data, these efforts
have not been accurate enough to hurdle the redundant price competition in the sector to the
targeted degree and with the targeted continuity.

In the Code (Bylaw) of Practice for Agricultural Insurance which determines the
principles of the agricultural insurance contracts that will be underwritten under the
framework of the Agricultural Insurance Law (number 5363) of the 14th.06.2006 (published
and put into effect on the 18th.05.2006), the Article 7 of the Second Section on the
Principles Relating to the Insurance Contracts explains the Tariffs and the rules. In the
first clause of the Article it is stated that “The tariffs and the rules to be applied in agricultural
insurances will be prepared by the Committee and submitted for approval to the Minister”.
According to the Article 4 of the same Code, the Committee means The Management
Committee of Agricultural Insurance Pool and the Minister refers to the Minister responsible
of the Undersecretariat of Treasury.

Accordingly, within the new State Supported Agricultural Insurance or Pool System, while
sales and marketing activities will be carried out by the traditional way and means of the

                                                                                                 682
insurance sector, insurance contracts shall be issued with the name of the underwriting
insurance company according to the conditions and the standards and prices as determined
by the Pool (Bora, 2006). In other words, the premium rates will be fixed and applied
uniformly by all the participating companies.

On the other hand, it is unattainable to carry out a statistical analysis concerning the level of
the price competition for the period before the new regulation. The main reason is the
difficulty to obtain data on the policy rates of the insurance companies. The only available
data relating to the individual insurance companies is the number of policies and the amount
of premiums published by the TSRSB. Thus, it is impossible to make a robust backward
judgment on the level of the price competition. Certainly, a rough evaluation could be made,
based on the numbers of policies and the amounts of premiums per individual companies.
However, as the risks covered in each policy and even the sum insured/premium ratios for
an individual company might be varied, such an approach is not considered as reliable.
Therefore, it is preferred no to make an evaluation on the price competition in the sector
deriving from the statistical data.



•              Competition on quality of services

Owing to the different views held by the insurance companies, i.e., to the weight of
agricultural insurance in their whole insurance activity and their germane future visions, there
occurred disparities between services of different companies. That is, those companies
which aimed at increasing their market share offers improved services (establishment of
branch specific units, employment and training of the experts, promotion, number of
agencies, speed of service etc.). However, Başak Insurance, which has almost a
monopolistic position in the market for most of the years, doesn’t owes this situation only to
improved services. This company is a sub-division of a bank which lends most of the
agricultural credit in the country.

As, in the new system, the standard policy and price determined by the Pool will apply, and
besides, all the registered insurance companies will operate under the assurance of the Pool
and the State, the activity expected in the market due to the 50% subsidies on the premiums
could cause both to the changing shares of market for the companies and to a more
intensive competition on the quality of services by them.



•   Market players: Is there a dominant company?

Number of the Companies
Data for the last decade reveals that the number of active companies in Turkish insurance
sector oscillates (Table 3.1). This figure, which increases between 1995 and 1998, starts to
decrease by the year 1999. In last four years 10 of the 63 companies have left the market,
and by the end of the year 2005 there exist only 53 companies in the sector. The average
number of the insurance companies in the Turkish market for the last eleven years has been
58.



                                                                                            683
Among these, the number of the insurance companies interested in the agricultural insurance
was about 15. Over the whole period, about 25% of all the insurance companies had
licenses in agricultural insurance.
Table 3.1 Number of Insurance and Reinsurance Companies
                          1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Mean

Insurance Companies        54         58     60     65    63      63         63       58      55     53     53     58.6
Companies active in
Agricultural Insurance  16    17             16     16    15      15         15       14      14     13     15     15.1
Branch
Share of the
Companies active in    29.6 29.3            26.7   24.6   23.8    23.8       23.8    24.1     25.5   24.5   28.3   25.8
Ag-Insurance (%)
Source: TSRSB, Annual Reports.



Even if the number of the companies licensed for the agricultural insurance branch seems to
swing around 15, when the numbers of the policies by insurance companies is examined, it
is understood that not all the registered companies at any certain year actually enact
agricultural insurance policies, and in fact, the number of active companies in the sector is
about 12. When the number of the companies underwrote at least one policy along the year
is considered by sub-branches of agricultural insurance, it is seen that while almost all of the
active companies operate in the area of hail insurance the average numbers of the
companies active in the areas of the poultry life, animal life and greenhouse insurances,
were about 1, 10 and 8, respectively (Table 3.2).


Table 3.2 Number of Insurance Companies By Sub-branches
                    2001        2002       2003    2004    2005     2006*         Mean (2001-05)

Hail                 12         11         10      11       11         11              11
Poultry Life          2          1          1       1       2            2             1,4
Animal Life           9          11         10      10      9            8             9,8
Greenhouse          10           8          7       7       7            6             7,8
TOTAL                12          12         11      11      12         12              11,6
* First 6 months.
Source: TSRSB records.



Market Shares of the Companies and the Ratios of Market Concentration
In this section, market conditions of the companies in the agricultural insurance sector is
analyzed, based on the numbers of policies and the premium production by individual
companies. To this end, market share of each company in terms of the number of policies is
analyzed and the one, two and four company concentration rates (CR1, CR2 and CR4) are
estimated. CRs which means the cumulative market share of the companies with highest
market shares (first one, two etc. companies) gives an idea on the level of the competition in

                                                                                                            684
the sector. The estimations are carried out both for the sub-branches and for the agricultural
insurance market as a whole. A similar evaluation is also made for total premium incomes by
companies.


Number of Policies

Number of hail insurance policies by companies for last six years are given in Table 3.3.
Market shares of the companies and the CRs obtained using the number of hail insurance
policies by companies are given in Table 3.4. Accordingly, along the period from 2001 to
2005, only one company (Başak Insurance) owned a 55% share in the market. This rate
equals to 75% for two companies and 89% for four. Thus, it is difficult to assert that there
existed a competitive structure in the hail insurance market.
Numbers of the poultry life insurance policies by companies for last six years are given in
Table 3.5
Market shares of the companies and the CRs obtained using the number of the poultry life
insurance policies by companies are given in Table 3.6. Accordingly, in the market of this
sub-branch, the market structure is monopolistic. While there, in some years, secondary
companies operating in this area, generally one company delivers almost all of the market.
Numbers of the animal life insurance policies by companies for last six years are given in
Table 3.7.
Market shares of the companies and the CRs obtained using the number of the animal life
insurance policies by companies are given in Table 3.8. Accordingly, in the market of this
sub-branch, the market structure is oligopolistic. Along the period from 2001 to 2005, only
one company owned 52% of the market. This rate equals to 82% for two companies and
98% for four. Interestingly, in this market, the leading company and the shares of individual
leading three firms have changed significantly over the analysis period. There seems to be
an attention by and a competition among the leading firms.
Numbers of the greenhouse policies by companies for last six years are given in Table 3.9.
Market shares of the companies and the CRs obtained using the number of the animal life
insurance policies by companies are given in Table 3.10. Accordingly, in the market of this
sub-branch, the market structure is oligopolistic. Along the period from 2001 to 2005, only
one company owned 44% of the market. This rate equals to 76% for two companies and
95% for four. Again the leading company shifts among several ones.
Numbers of the agricultural insurance policies by companies for last six years are given in
Table 3.11.
Market shares of the companies and the CRs obtained using the total numbers of the
agricultural insurance policies by companies are given in Table 3.12. Accordingly, in the
market of agricultural insurances, the market structure is oligopolistic. Along the period from
2001 to 2005, only one company owned 52% of the market. This rate equals to 76% for two
companies and 88% for four. In the whole, the shift of the market leadership from Başak
Insurance to Güven Insurance over time is evident.



                                                                                            685
Table 3.3 Number of Policies by Companies for Hail Insurance
                     2001          2002           2003           2004         2005             2006*
AKSİGORTA                1330        1715              1500          1965         3530           4043
ANADOLU                   181                                           2                         101
ANKARA                                                                                             27
AXA OYAK                  328            536            379           900           824           504
BAŞAK                 31309         48329          45053         52300            85851         76311
GARANTİ                                                                             211           654
GÜNEŞ                    8159        6161              6756          9947         13918         13996
GÜVEN                    4474        9433          14782         27604            60513         75367
İHLAS                     358             1
İSVİÇRE                  3640        5052              4175          4795         8189          12904
KOÇ ALLIANZ              1736        2661              4398          4545          8638          9057
ŞEKER                    3020        2860              2126          3783         4211           3334
TİCARET                      1            1               1             1             1
TGENEL
YAPI KREDİ                   1            7               1             1             1
 TOTAL               54537          76756          79171        105843        185887           196298
* First 6 months.
Source: TSRSB records.


Table 3.4 Number of Policies by Companies for Hail Insurance (%)
                  2001       2002          2003          2004         2005         2006*        Mean (2001-05)
AKSİGORTA           2,44          2,23          1,89          1,86          1,9      2,06                2,06
ANADOLU             0,33            0             0             0            0       0,05                0,07
ANKARA                   0          0             0             0             0      0,01                0,00
AXA OYAK             0,6           0,7          0,48          0,85       0,44        0,26                0,61
BAŞAK              57,41         62,96         56,91      49,41         46,18       38,88               54,57
GARANTİ                  0          0             0             0        0,11        0,33                0,02
GÜNEŞ              14,96          8,03          8,53           9,4       7,49        7,13                9,68
GÜVEN                8,2         12,29         18,67      26,08         32,55       38,39               19,56
İHLAS               0,66            0             0             0             0            0             0,13
İSVİÇRE             6,67          6,58          5,27          4,53       4,41        6,57                5,49
KOÇ ALLIANZ         3,18          3,47          5,56          4,29       4,65        4,61                4,23
ŞEKER               5,54          3,73          2,69          3,57       2,27         1,7                3,56
TİCARET                  0          0             0             0             0            0             0,00
TGENEL                   0          0             0             0             0            0             0,00
YAPI KREDİ               0        0,01            0             0             0            0             0,00
TOTAL                100          100           100           100           100       100              100,00
CR1                 0,57          0,63          0,57          0,49       0,46        0,39                0,55
CR2                 0,72          0,75          0,76          0,75       0,79        0,77                0,75
 CR4                  0,87     0,9               0,9          0,89       0,91        0,91                0,89
* First 6 months.
Source: Estimated using TSRSB records


                                                                                                                 686
Table 3.5 Number of Policies by Companies for Poultry Life Insurance
                   2001       2002       2003       2004       2005      2006*
AKSİGORTA
ANADOLU
ANKARA
AXA OYAK
BAŞAK              2283        303        420        364       3608        122
GARANTİ
GÜNEŞ
GÜVEN                    1
İHLAS
İSVİÇRE                                                        2241
KOÇ ALLIANZ
ŞEKER
TİCARET
T GENEL                                                                      1
YAPI KREDİ
 TOTAL             2284        303        420        364       5849        123
* First 6 months.
Source: TSRSB records


Table 3.6 Number of Policies by Companies for Poultry Life Insurance (%)
                  2001       2002       2003       2004       2005       2006*    Mean (2001-05)
AKSİGORTA                0          0          0          0          0       0            0
ANADOLU                  0          0          0          0          0       0            0
ANKARA                   0          0          0          0          0       0            0
AXA OYAK                 0          0          0          0          0       0            0
BAŞAK             99,96        100        100        100      61,69       99,19       92,33
GARANTİ                  0          0          0          0          0       0            0
GÜNEŞ                    0          0          0          0          0       0            0
GÜVEN               0,04            0          0          0          0       0         0,01
İHLAS                    0          0          0          0          0       0            0
İSVİÇRE                  0          0          0          0   38,31          0         7,66
KOÇ ALLIANZ              0          0          0          0          0       0            0
ŞEKER                    0          0          0          0          0       0            0
TİCARET                  0          0          0          0          0       0            0
TGENEL                   0          0          0          0          0     0,81           0
YAPI KREDİ               0          0          0          0          0       0            0
TOTAL               100        100        100        100        100        100          100
CR1                      1          1          1          1    0,62        0,99        0,92
CR2                      1          1          1          1    1,00          1            1
 CR4                    1       1              1          1          1       1            1
* First 6 months.
Source: Estimated using TSRSB records


                                                                                                   687
Table 3.7 Number of Policies by Companies for Animal Life Insurance
                  2001       2002       2003       2004         2005        2006*
AKSİGORTA                           1          1           2            2           1
ANADOLU                  1          1          1           2            1
ANKARA
AXA OYAK                 3          2          1           8            8           3
BAŞAK              6982       4976       3963       9800          9674         922
GARANTİ
GÜNEŞ              1348        957        212        142           130
GÜVEN              1945       2320       1173      11803         22175        8155
İHLAS                               1
İSVİÇRE            1781       2879       3202        327                      3507
KOÇ ALLIANZ           12        31         22         21                4           2
ŞEKER               106        308        419       1885            10         571
TİCARET                  1          1          1           1            1
TGENEL                                                                              1
YAPI KREDİ
 TOTAL            12179      11477       8995      23991         32005       13162
* First 6 months.
Source: TSRSB records.


Table 3.8 Number of Policies by Companies for Animal Life Insurance (%)
                   2001      2002       2003       2004         2005        2006*       Mean (2001-2005)
AKSİGORTA             0       0,01       0,01       0,01         0,01        0,01             0,01
ANADOLU             0,01      0,01       0,01       0,01         0,00          0              0,01
ANKARA                0         0          0          0          0,00          0              0,00
AXA OYAK            0,02      0,02       0,01       0,03         0,02        0,02             0,02
BAŞAK             57,33      43,36      44,06      40,85        30,23        7,01            43,17
GARANTİ               0         0          0          0          0,00          0              0,00
GÜNEŞ             11,07       8,34       2,36       0,59         0,41          0              4,55
GÜVEN             15,97      20,21      13,04       49,2        69,29       61,96            33,54
İHLAS                 0       0,01         0          0          0,00          0              0,00
İSVİÇRE           14,62      25,08       35,6       1,36         0,00       26,64            15,33
KOÇ ALLIANZ          0,1      0,27       0,24       0,09         0,01        0,02             0,14
ŞEKER               0,87      2,68       4,66       7,86         0,03        4,34             3,22
TİCARET             0,01      0,01       0,01         0          0,00          0              0,01
TGENEL                0         0          0          0          0,00        0,01             0,00
YAPI KREDİ            0         0          0          0          0,00          0              0,00
TOTAL               100       100        100        100        100,00        100            100,00
CR1                 0,57      0,43       0,44       0,49         0,69        0,62             0,52
CR2                 0,73      0,68        0,8        0,9         1,00        0,89             0,82
 CR4                 0,99   0,97     0,97           0,99         1,00          1              0,98
* First 6 months.
Source: Estimated using TSRSB records


                                                                                                           688
Table 3.9 Number of Policies by Companies for Greenhouse Insurance
                 2001 2002 2003 2004 2005                       2006*
AKSİGORTA          12          5      11         2
ANADOLU
ANKARA
AXA OYAK            3                                      1
BAŞAK             438 2693 2627 3119                     301        435
GARANTİ
GÜNEŞ             342        559     663       780       798        438
GÜVEN            1343 2321 2726 2768                                 263
İHLAS              72
İSVİÇRE             4          5                           6
KOÇ ALLIANZ       188        246     643       537       570          43
ŞEKER             210        325     295       289       168           4
TİCARET             1          1          1      1         1
TGENEL                                                                 7
YAPI KREDİ
 TOTAL            2613 6155 6966 7496 1845                          1190
* First 6 months.
Source: TSRSB records.


Table 3.10 Number of Policies by Companies for Greenhouse Insurance (%)

                  2001        2002            2003       2004         2005        2006*    Mean (2001-05)
AKSİGORTA           0,46           0,08        0,16        0,03              0        0         0,15
ANADOLU                  0           0               0          0            0        0         0,00
ANKARA                   0           0               0          0            0        0         0,00
AXA OYAK            0,11             0               0          0          0,05       0         0,03
BAŞAK              16,76       43,75          37,71       41,61        16,31       36,55       31,23
GARANTİ                  0           0               0          0            0        0         0,00
GÜNEŞ              13,09           9,08        9,52       10,41        43,25       36,81       17,07
GÜVEN               51,4       37,71          39,13       36,93              0      22,1       33,03
İHLAS               2,76             0               0          0            0        0         0,55
İSVİÇRE             0,15           0,08              0          0          0,33       0         0,11
KOÇ ALLIANZ         7,19             4         9,23        7,16        30,89        3,61       11,69
ŞEKER               8,04           5,28        4,23        3,86            9,11     0,34        6,10
TİCARET             0,04           0,02        0,01        0,01            0,05       0         0,03
TGENEL                   0           0               0          0            0      0,59        0,00
YAPI KREDİ               0           0               0          0            0        0         0,00
TOTAL               100            100          100        100             100      100       100,00
CR1                 0,51           0,44        0,39        0,42            0,43     0,37        0,44
CR2                 0,68           0,81        0,77        0,79            0,74     0,73        0,76
 CR4                 0,89    0,96     0,96                 0,96              1      0,99        0,95
* First 6 months.
Source: Estimated using TSRSB records


                                                                                                            689
Table 3.11 Number of Agricultural Insurance Policies by Companies
                  2001       2002       2003       2004            2005           2006*
AKSİGORTA           1342      1721       1512        1969           3532            4044
ANADOLU              182            1          1              4              1       101
ANKARA                   0          0          0              0              0           27
AXA OYAK             334       538        380         908            833             507
BAŞAK             41012      56301      52063       65583          99434           77790
GARANTİ                  0          0          0              0      211             654
GÜNEŞ               9849      7677       7631       10869          14846           14434
GÜVEN               7763     14074      18681       42175          85807           83785
İHLAS                430            2          0              0              0            0
İSVİÇRE             5425      7936       7377        5122          10436           16411
KOÇ ALLIANZ         1936      2938       5063        5103           9212            9102
ŞEKER               3336      3493       2840        5957           4389            3909
TİCARET                  3          3          3              3              3            0
TGENEL                   0          0          0              0              0            9
YAPI KREDİ               1          7          1              1              1            0
 TOTAL            71613      94691      95552      137694         228705          210773
* First 6 months.
Source: TSRSB records.


Table 3.12 Number of Agricultural Insurance Policies by Companies (%)

                  2001       2002       2003       2004           2005           2006*        Mean (2001-05)
AKSİGORTA           1,87      1,82       1,58       1,43           1,54            1,92              1,65
ANADOLU             0,25            0          0          0              0         0,05              0,05
ANKARA                   0          0          0          0              0         0,01              0,00
AXA OYAK            0,47      0,57        0,4       0,66           0,36            0,24              0,49
BAŞAK              57,27     59,46      54,49      47,63          43,48           36,91             52,47
GARANTİ                  0          0          0          0        0,09            0,31              0,02
GÜNEŞ              13,75      8,11       7,99       7,89           6,49            6,85              8,85
GÜVEN              10,84     14,86      19,55      30,63          37,52           39,75             22,68
İHLAS                0,6            0          0          0              0           0               0,12
İSVİÇRE             7,58      8,38       7,72       3,72           4,56            7,79              6,39
KOÇ ALLIANZ          2,7       3,1        5,3       3,71           4,03            4,32              3,77
ŞEKER               4,66      3,69       2,97       4,33           1,92            1,85              3,51
TİCARET                  0          0          0          0              0           0               0,00
TGENEL                   0          0          0          0              0           0               0,00
YAPI KREDİ               0    0,01             0          0              0           0               0,00
TOTAL               100        100        100        100            100            100             100,00
CR1                 0,57      0,59       0,54       0,48           0,43             0,4              0,52
CR2                 0,71      0,74       0,74       0,78           0,81            0,77              0,76
 CR4                 0,89   0,91      0,85          0,86           0,89            0,86              0,88
* First 6 months.
Source: Estimated using TSRSB records


                                                                                                               690
Premium Incomes by the Companies

In order to further analyze the level of the competition in the agricultural insurance market,
market shares of the firms and the CRs are also estimated for the premium incomes by
companies (Table 3.13).


When the shares of the insurance companies in the total premium incomes is considered
(Table 3.14), it is observed that Başak Insurance has a notably leader position in the market.
Such that, along the period of 1995-2005, this Company has collected about 59% of the total
premium incomes. While the share of the Company within the total number of the policies
was 52% between 2001 and 2005, in the same period, the fact that it had a 59% share from
the premium incomes reveals that this company has a remarkably monopolistic position in
the market.


The CRs estimated based on the premium incomes in Turkish agricultural insurance market
are given in Table 3.14. As may be inferred from the figures, there exist an oligopolistic
structure in the market also in terms of the premium incomes. That is, during the period
between 2001 and 2005 only one company holds about 61% of the market. The rate is 75%
for two and 89% for four companies.


Table 3.13 Premium Income by Companies for Agricultural Insurance (000 YTL)
      Name of
                 1995 1996         1997     1998     1999   2000   2001    2002       2003       2004    2005
      Company

Aksigorta            9      16       41       60       65    186    214      439        496      2,963   1,337
American Home      i.a.     i.a.
Anadolu            18       26       37       97       42     54     58       70        132       230     225
Ankara             i.a.       2      i.a.       1       1      1      1           6          7      5    3,868
Axa Oyak                                               65     48     76       95        110       207     516
Başak             481     1,431    1,532    1,632    2,270 3,452   4,970   8,913       9,734 11,420 16,480
Ege                i.a.     i.a.       1
Garanti                                                                                                   270
Güneş              27      101      136      326      512 1,010     689      992       1,240     1,552   2,331
Güven                                                        183    485    1,494       4,833     8,252 17,790
Halk               10       27       55       27        8
Hür                                           i.a.
İhlas                2      32       63      179       73    175     86           5          3      5      22
İsviçre            11       10       24       75      136    255    801    1,575       1,943     2,014   2,498
Kapital                              28       41       12
Koç Allianz                                  208      264    466    632    1,223       1,642     1,428   2,081


                                                                                                    691
Merkez                        1                  1,9              6        11        15       14
Nordstern                i.a.             1
Oyak                          2           3       14          43
Ray                                                                                                                                    57
Şark                     25           54         143
Şeker                     21          45         113         303          473       705      628       609        440       1,329   1,041
Ticaret                              i.a.        i.a.             1           1       2        2         2             4       11      12
Universal                     1      i.a.             1       34              2       4
Yapı Kredi                                                                           10       -1         1             1        1
Total                  608        1,748       2,190       3,000       3,937       6,566   8,655    15,424     20,586       29,417 48,528
Destek                        2           7       13          44          38         69      86        118        130
Halk                          1           2           4           5       12          6
Milli                     77         235         314         464          581       934     1099       905      1,132       1,168   1,515
Total                     80         244         331         513          631      1009     1185      1,023     1,262       1,168   1,515
General Total            688       1,992       2,519       3,546         4566      7575     9840    16,447     21,848 30,585 50,046
i.a.: Insignificant amount.

Source: TSRSB records.



Table 3.14 Premium Income by Companies for Agricultural Insurance (%)

 Name of
                1995     1996        1997        1998        1999         2000       2001    2002      2003     2004       2005 Mean
 Company

Aksigorta         1,48        0,92        1,87        1,98        3,44     2,06       5,12     3,94     4,54     0,18       0,05    2,32
American
                  0,00        0,00        0,00        0,00        0,00     0,00       0,00     0,00     0,00     0,00       0,00    0,00
Home
Anadolu           2,96        1,49        1,69        3,20        2,22     0,60       1,39     0,63     1,21    14,21       8,09    3,43
Ankara            0,00        0,11        0,00        0,03        0,05     0,01       0,02     0,05     0,06     0,31       0,14    0,07
Axa Oyak          0,00        0,00        0,00        0,00        3,44     0,53       1,82     0,85     1,01    12,79 18,55         3,54
Başak            79.11 81.86 69.95 54.40 57.66 52.57                                 57.42    57.79    47.28    38.82 33.96 57.35
Ege               0,00        0,00        0,05        0,00        0,00     0,00       0,00     0,00     0,00     0,00       0,00    0,00
Garanti           0,00        0,00        0,00        0,00        0,00     0,00       0,00     0,00     0,00     0,00       9,71    0,88
Güneş             4.44        5.78        6.21 10.87 13.00 15.38                      7.96     6.43     6.02     5.28       4.80    7.83
Güven             0.00        0.00        0.00        0.00        0.00     2.79       5.60     9.69    23.48    28.05 36.66         9.66
Halk              1,64        1,54        2,51        0,89        0,42     0,00       0,00     0,00     0,00     0,00       0,00    0,64
Hür               0,00        0,00        0,00        0,00        0,00     0,00       0,00     0,00     0,00     0,00       0,00    0,00
İhlas             0,33        1,83        2,88        5,90        3,86     1,94       2,06     0,04     0,03     0,31       0,79    1,82
İsviçre           1,81        0,57        1,10        2,47        7,19     2,83      19,15     0,01     0,02     0,12       0,09    3,22



                                                                                                                                692
Kapital          0,00    0,00    1,28    1,35   0,63   0,00    0,00     0,00    0,00   0,00   0,00   0,30
Koç Allianz      0,00    0,00    0,00    6,86 13,95    5,17   15,11     0,01    0,02   0,09   0,07   3,75
Merkez           0,16    0,00    0,09    0,20   0,58   0,17    0,33     0,00    0,00   0,00   0,00   0,14
Nordstern        0,00    0,06    0,00    0,00   0,00   0,00    0,00     0,00    0,00   0,00   0,00   0,01
Oyak             0,33    0,17    0,64    1,42   0,00   0,00    0,00     0,00    0,00   0,00   0,00   0,23
Ray              0,00    0,00    0,00    0,00   0,00   0,00    0,00     0,00    0,00   0,00   2,05   0,19
Şark             4,11    3,09    6,53    0,00   0,00   0,00    0,00     0,00    0,00   0,00   0,00   1,25
Şeker            3,45    2,57    5,16    9,99 25,00    7,83   15,02     5,47    4,02   0,08   0,04   7,15
Ticaret          0,00    0,00    0,00    0,03   0,05   0,02    0,05     0,02    0,04   0,68   0,43   0,12
Universal        0,16    0,00    0,05    1,12   0,11   0,04    0,00     0,00    0,00   0,00   0,00   0,13
Yapı Kredi       0,00    0,00    0,00    0,00   0,00   0,11   -0,02     0,01    0,01   0,06   0,00   0,02

Total          100,00 100,00 100,00 100,00 100,00 100,0       100,0    100,0   100,0 100,00 100,00 100,00

CR1              0,79    0,82    0,70    0,54   0,27   0,38    0,19     0,80    0,89   0,71   0,59   0,61
CR2              0,84    0,88    0,76    0,65   0,52   0,77    0,36     0,89    0,94   0,85   0,78   0,75
CR4              0,91    0,93    0,88    0,81   0,78   0,90    0,66     0,98    0,99   0,98   0,96   0,89

Source: Estimated using TSRSB records



Competitive Structure of the Agricultural Insurance Market According to the Number
of Policies and Premium Incomes


In Table 3.15, mean CR ratios regarding the sub-branches of the agricultural insurances are
given. These data reveals the oligopolistic structure of the market.


Table 3.15 CR Ratios in Agricultural Insurance Market (2001-2005)

                                                  CR1           CR2            CR4
                     Hail Insurance               0.54          0.75           0.89
                     Poultry Life Insurance       0.92          1,00           1.00
 According to
 the number          Animal Life Insurance        0.52          0.82           0.98
 of policies
                     Greenhouse Insurance         0.44          0.76           0.95

                     Agricultural Insurance       0.52          0.76           0.88

 According to the amount of premiums*
                                                  0.61          0.75           0.89
             (Agricultural Insurance)
* Estimated for 1995-2005.

Source: Estimated using TSRSB records.




                                                                                                 693
To Resume:

In Turkey, the agricultural insurance market presents a monopolistic to oligopolistic structure.
Limited number of companies dominate the whole market. However, this situation doesn’t
arise from the special efforts of the dominating companies to control the market, but a result
of the lack of interest by other insurance companies in the agricultural insurance branch. As
a matter of fact, Başak Insurance, which had almost a monopolistic position in the market
especially at the beginning of the analysis period, owed this situation to being a sub-division
of a bank which, for years, lent most of the agricultural credit in the country. Thus, the
uncompetitive structure of the market has not been a result of designed policies.
Nevertheless, recently some other companies seem to pay more and more attention in the
sector. This trend is attributed to the fresh enactment of the Law of Agricultural Insurances.
Conversely, it is known that, there existed a price competition to a certain extent. In the
newly introduced pool system, however, because of the fixed tariffs, price competition will not
be possible. The Competition Institution of Turkey criticizes the new Law of Agricultural
Insurance in this view and points out the inconvenience of the pool system when it accounts
for more than 20% of the market (TCA, 2005).
With the enactment of the long waited Agricultural Insurance Law and the resulting new
Government Subsidized Agricultural Insurance System, a greater interest to the sector by the
insurance companies is expected. This is reflected by the recent market data and the
number of companies registered in the Pool. Yet, under the present conditions, the
competition among the companies may be on quality of services (establishment of branch
specific units, employment and training of the experts, promotion, number of agencies, speed
of service etc.) base. It may be expected that, the companies already having high shares of
market, will have advantage with their status on the farmers’ sight, their improved local
relations and their experience.


4. General features
Indications of most frequent characteristics. To be detailed in the next paragraph and the
technical form of products

 •   Compulsoriness for the farmer
Participation of the farmers in the Insurance System has always been and still is voluntary.
On the other hand, with the new adjustment (Law Number 5363) in the sector, and in order to
avoid contradiction, State disaster aids for the risks within the coverage of insurance are
repealed. Also some credit programs etc. oblige assurance via insurance of the products
subject to the credit.


 •   Public subsidies and cost for the farmers.
According to the new Law of Agricultural Insurance:
       With the aim of promoting the development of the agricultural insurance, premiums of
       the farmers shall be subsidized by the Government.



                                                                                           694
       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.
Currently, the subsidy level is determined and being applied as 50% of the total premium.
And the rest (the other 50%) is paid by the farmers.


 •   Franchise (%). Is it computed on the total of the farm or per crop?
There exist both franchise and coinsurance. It is computed per crop basis. Percentages for
franchise and coinsurance differ per product group (per type of insurance). Respective
figures for each type of insurance is given in the forms attached in the annex.


 •   Existence and importance of index-based insurances
There is no index based agricultural insurances available in Turkey. The general
consideration is that, the index based insurance is inappropriate for the case of Turkey. This
is explained with the lack of data and meteorological infrastructure to determine whether
events for many small units and with the varied character of climate and geographical
structure for even neighboring villages.
In Turkey, index-based insurance model have been promoted by World Bank, within the
framework of the ARIP Project [see Section 1 (the history of ag-insurance) and Section 2
(objectives of the policy and programs)], started in 2000. Nevertheless, the period between
the year 2000 and 2003 is considered as having negative effect on the improvement of the
sector and the legislative work.
After much debate on the subject, cooperative investigations carried out by the agricultural
insurance working groups built up by the experts from the Ministry of Agriculture, Turkish
Union of the Chambers of Agriculture and the insurance companies have revealed that:
In Turkey, considering the ownership structure in the agricultural areas; farm scale;
characteristics of the farmers; extensive differences among farms with respect to the
operating conditions, maintenance, production, quality and yields; the index based insurance
is improper. Moreover, in Turkey, satellite and radar systems enabling the measurement of
natural risks of meteorological character needed for index based insurance schemes are
absent. Besides, index based insurance is criticized for it would have a negative impact on
the technical personnel employment while Turkey owned high number of agricultural
engineers.
In Turkey, there are some ongoing large scale irrigation projects in the Southeastern and
Central Anatolia. When these projects are finalized, large areas having same yields and
planted with same varieties are expected to come about. It’s been suggested that, index
tables could be used in these areas, especially for drought insurance applications. But, it is
also reminded that, even in this case, as yield and loss assessments would be carried out in
the fields, this could not be called as being “index insurance” (Dinler et al., 2005).


                                                                                         695
 •      Most usual method for determination of losses
The losses are determined at the field, by technical personnel. The estimation is based on
expected yield and loss ratio. Details per insurance type are given in the annex, technical
forms.


 •      Delay in paying indemnity after event or harvest.
In the previous system of purely private insurance, there could be extra delays in payments.
There is no backward data on the extent of delay. However, the new system limits the delay
in indemnity payments as 30 days maximum after the event or harvest.


 •      Is there a bonus-malus system?
Up to now, any bonus-malus system is not practiced. Neither it is mentioned or organized in
the new system yet. However, there is intention, as the farmers demand such an option. To
start working on such a plan, first it is decided to observe the results of the new system as a
whole. Currently, the corrective influence expected from the insurance sector has rather
arranged by many restrictive conditions in the insurance contracts (General and Technical
Conditions).


 •      Is there an income insurance?
There is no income insurances yet.


 •      Is there a (significant) market of MPCI? (multi-peril crop insurances)
In Turkey, 98% of the cultivated area (24.4 million hectares) is under hail risk and about half
of the hail precipitations cause significant losses. Thus, it can be inferred that, there exist a
considerable potential in terms of agricultural insurances. The agricultural area in the Black
Sea Region suffers from flood; those in the Mediterranean are under frost and hail risks; and
in the Central and Eastern Anatolia Regions hail is a major problem (Utkueri, 2005). Because
of the variety of the risks faced in Turkish agriculture, the fact that owing basically to the
reasons like:
  i.     lack of data and resulting actuarial studies;
  ii.    limited level of interest by poor and poorly educated farmers;
 iii.    and absence of the companies who will insure and reinsure such extensive risks
         without State guarantee,
only hail, fire, (partially) frost and animal life risks are insured so far have always been
subject to critiques. With the new Law and the State supported system brought about, it is
aimed at widening the scope of the crop insurance and providing a gradual improvement in
this spot.



                                                                                            696
In the following, a collection of data on insurance market is presented in order to give more
insight on the subject.


Table 4.1 Some Recent Data on Turkish Agricultural Insurance Market (2005)
Number of Policies (Units)                                                                    228,705
Premium Income in Agricultural Insurance (000 YTL)                                             48,530
Premiums Transferred to Reassurance (000 YTL)                                                  30,334
Growth Rate of the Premium Incomes in Agricultural Insurance in National Currency (%)           64.97
Percentage Share of the Agricultural Insurance Premiums in Total Insurance Premiums
(%)                                                                                               0.62
Premium Income in Agricultural Insurance (USD)                                              36,195,167
Growth Rate of the Premium Income in Agricultural Insurance in USD (%)                          64.42
Technical Profit in the Agricultural Insurance Branch (000 YTL)                                 1,929
Percentage Share of the Technical Profit in the Agricultural Insurance in Total Technical
Profits (%)                                                                                       0.33
Loss/Premium Ratio (%)                                                                          87.38
Premium Production of the Reinsurance Companies in the Branch of Agricultural                   1,515
Insurance (000 YTL)
Growth Rate of the Premium Production of the Reinsurance Companies in National
Currency (%)                                                                                    29.75

Source: TARSIM and TSRSB




                                                                                                 697
Table 4.2 Premium Production, Indemnity Payments and Loss/Premium Ratios by
Insurance Companies in the Branch of Agricultural Insurance, YTL (2004)
                                                     Premium        Indemnity
                                                    Production                      Loss/Premium
                                                                    Payments
                                                                                      Ratios (%)
                                                    (000 YTL)       (000 YTL)

Plant Production Insurances
- Hail                                                   13,943          6,078             48.59
- Greenhouse                                              2,339            351             15.00
- Frost (Manisa Denizli Pilot Project for grapes)           962          4,637            482.02
Sub Total                                                17,244         11,066             64.17
Farm Animals Insurance
- Cows and sheep like animals                             8,728          4,840             55.45
- Poultry                                                   707            664             93.92
- Aquaculture                                                10              0
- Other                                                   2,310            186              8.05
Sub Total                                                11,755          5,690             48.40
GENERAL TOTAL                                            28,999         16,756             57.78
Source: TARSIM



Table 4.3 Figures on the Damage in Plant Product Insurances (2004)
                                                         Number of
                                                                          Area       Sum Insured
         Production*                   Policy             Policies
                                                                          (da)       (Million YTL)
                                                          (Units)
                              Total Policies                62,397       588,002            375.0
Open Area (Hail)
                              Policies with Loss Claim          8,241    126,950             48.5
                              Total Policies                46,370      2,507,136           257.8
Open Area (Hail + Fire)**
                              Policies with Loss Claim             32        538               0.4
                              Total Policies                    2,090     24,332             26.0
Open Area (Frost)
                              Policies with Loss Claim          1,738     14,309             20.0
                              Total Policies                    6,879     39,854            224.6
Greenhouse
                              Policies with Loss Claim            375        575             17.6
                              Total Policies               117,736      3,159,324           883.4
TOTAL
                              Policies with Loss Claim      10,386       142,372             86.4
* Predictions
** For total policies, data include only those obtained from Başak and Güven insurance companies.
Loss claims include only those policies with fire claim.
Source: TARSIM




                                                                                                     698
   •   Are there insurances on prices?
There are no insurances on prices. Some other risk management alternatives are tried to be
developed. An example would be the newly established local Future and Options Markets as
pilot application for specific crops (Cotton; Wheat). Formerly (up to the year 2000), price
fluctuations were used to be compensated by government subsidies. This procedure is no
more practiced.


5. Insurance products available
Description of all the available programs per crops per groups of crops (as probably defined
by the insurances) and per type of animals.


The Agricultural Insurance Programs Currently Available in Turkey:
- Crop & hail insurance
- Livestock insurance
- Poultry insurance
- Greenhouse insurance


Including also information on
           •   Number of farms covered

           •   Covered areas (crops, livestock and revenue) and type of covered risk
           •   Coverage in value of production
The information in this paragraph is extended in the technical form in annex. It will refer to
the most recent year available.


In Turkey, it’s been pronounced that currently of all the cultivated area (24.4 million hectares)
only about 1.8% is insured. The insurance rate is even less for livestock, with about only
0.3% of the whole livestock assets (Dinler et al., 2005). In the year 2004, total premium
production of the insurance companies in the branch of agricultural insurance as a whole has
been YTL 28,999,000 (equals to USD 22,013,804); and there obtained YTL 1,216 of
technical profits.

For the hail insurance, in 315,932 hectares, 73 different products, amounting to total
production value of YTL 883.4 million have been insured against hail damage; and YTL 17.4
millions premium have been produced. Losses have occurred in 14,237 hectares, for YTL
86.4 million of the some insured on this area, insured companies have paid YTL 11.8 million
of indemnity to the farmers.
In 2005, sum of the agricultural insurance premiums have risen up to YTL 48.53 million (USD
36,195,167). This meant a 64.97% increase over the figure of 2004 (64.42% in USD).




                                                                                            699
Table 5.1 Some Recent Figures on Agricultural Insurance in Turkey (2004)
                           Number        Alan      Sum Insured      Premium        Indemnity    Loss/Premiu
                             of                                    Production      Payments      m Ratios
                                         (ha)      (million YTL)
                           Policies                                 (000 YTL)      (000 YTL)          (%)
Plant Poduction Insurances
- Hail                      62,397       58,800           375,0
                                                                       13,943a        6,078 a          48.59 a
- Hail+Fire**               46,370      250,714           257,8
- Frost                       2,090       2,433             26,0            962         4,637          482.02
- Greenhouse                  6,879       3,985           224,6           2,339           351           15.00
Sub Total                  117,736      315,932           883,4         17,244        11,066            64.17
Farm Animals Insurance
- Cows, sheep & alike      23,991b                                        8,728         4,840           55.45
                                    b
- Poultry                     364                                           707           664           93.92
- Aquaculture                   n.a.                                         10             0
- Other                         n.a.                                      2,310           186               8.05
Sub Total                   23,207                                      11,755          5,690           48.40
GENERAL TOTAL              140,943                                      28,999        16,756            57.78
*Predictions
** For total policies, data include only those obtained from Başak and Güven insurance companies.
Loss claims include only those policies with fire claim.
a Figure for both groups of hail and hail + fire
b Doesn’t fit the total number of farm animals insurances, because of different statistical source.
Source: TARSIM, TSRSB


6. Coverage in the last years
This paragraph summarizes of the information given in the tables by type of product and
describes the evolution in the last years. The information is partly redundant with paragraph
5, but this paragraph focuses on the time trend. If possible figures should be given year by
year over a period of 5 years. Alternatively data for one date around 5 years before the last
available. For data on compensation payments, multi-annual averages are welcome.

               •   Number and % of farms covered
               •   Total area insured by group of crops and %
               •   Total number of animals covered by type of animal and %
               •   Production value covered and %
               •   Total amount of premiums
               •   Compensation payments to farmers (indemnities)




                                                                                                      700
The 13 companies, active in the agricultural branch in 2004 took in total premiums amounting
to YTL 29,417. This is a year-on rise of 42.90% as measured in national currency and in
current prices and a 48.99% increase on a USD basis (Tables 6.1 and 6.2).


Table 6.1 Premium Income in Agricultural Insurance, Annual Changes and Percentage
Share of the Agricultural Insurance Premiums in Total Insurance Premiums, 000 YTL
                    1995      1996    1997 1998 1999 2000                2001     2002      2003      2004     2005
Premium               606   1,749 2,190 3,000 3,937 6,566 8,655 15,424 20,586 29,417 48,530
Annual
                 247.44 188.57 25.22 37.00 31.21 66.79 31.82                      78.20     33.47     42.90    64.97
Changes
Percentage
                    0.94      1.34    0.76     0.54    0.40     0.37     0.35      0.41     0.40      0.43     0.62
Share
Source: TSRSB



Table 6.2 Premium Income in Agricultural Insurance, Annual Changes and Percentage
Share of the Agricultural Insurance Premiums in Total Insurance Premiums, USD
             1995      1996     1997       1998       1999     2000      2001      2002     2003      2004     2005
           9,926,9 16,340, 10,696, 9,594,7 7,314,9 9,774,8 6,012,1 9,406,3 14,775, 22,013, 36,195,
Premium
                83     568     513      33      17      38      46      41     153     804     167

Annual
             120.16     64.61    -34.54      -10.30   -23.76     33.63   -38.49     56.46     57.08    48.99    64.42
Changes

Source: TSRSB



Table 6.3 Evolution of Agricultural Insurances in Turkey
                                                     Premium
                               Premium                                   Technical
           Number of                              Transferred to                            Loss Ratio
 Years                          Income                                     Profit
            Policies                                Reassurer                                  (%)
                              (000 YTL)                                  (000 YTL)
                                                    (000 YTL)
  1995           n.a.                606                       n.a.               90           54.00
  1996       169,303             1,748                         980              -306          124.06
  1997        61147              2,190                       1,313              -364          125.81
  1998        76,887             3,000                       2,017                -24          92.25
  1999        59,406             3,937                       2,587               180           87.91
  2000        86,375             6,566                       4,664              1,355          36.02
  2001        71,613             8,654                       6,486               873           47.56
  2002        94,691            15,424                   11,748                 1,839          60.10
  2003        95,552            20,586                   13,449                 2,006         113.08
  2004       137,694            29,417                   18,055                 1,216          52.65
  2005       228,705            48,530                   30,334                 1,929          87.38
n.a.: data non-available
Source: TSRSB



                                                                                                                701
Loss Ratio= Incurred Losses / Earned Premium

Incurred Losses = (Losses Paid + Reserve for O/S Losses)–Reserve for O/S Losses Brought Forward

Earned Premium = (Premiums + Reserve for Unexpired Risk Brought Forward) – Reserve for Unexpired Risk



Table 6.4 Number of Insurance Policies by Sub-Branches of Agriculture
 Years        Hail        Greenhouse      Animal Life    Poultry Life           TOTAL

 1996        56,564            6,714        105,638            387              169,303
 1997        28,665            2,815         29,475            192               61,147
 1998        47,818            2,850         25,806            413               76,887
 1999        42,639            2,870         13,467            430               59,406
 2000        73,558            2,287           7,774         2,756               86,375
 2001        54,537            2,613         12,179          2,284               71,613
 2002        76,756            6,155         11,477            303               94,691
 2003        79,171            6,966           8,995           420               95,552
 2004       105,843            7,496         23,991            364              137,694
 2005       185,887            1,845         32,005          5,849              228,705
Source: TSRSB



Table 6.5 Figures of Plant Products Insurances
          Number of Policies     Premium Income         Reimbursement Paid                Loss Ratio
 Year
                 (Unit)                (000 YTL)            (000 YTL.)                       (%)

1999                  45,172               2,425                        1,547                   63.79
2000                  77,877               4,147                        1,412                   34.05
2001                  58,911               6,268                        1,620                   25.85
2002                  85,910              11,594                        4,532                   39.09
2003                  76,781              11,650                        4,471                   38.38
2004                 113,276              17,244                     11,066                     64.17
2005                 197,200              30,335                     19,122                     63.04
Source: TARSİM



Table 6.6 Figures of Animal Products Insurances
          Number of Policies     Premium Income         Reimbursement Paid                Loss Ratio
 Year
                 (Unit)                (000 YTL)             (000 YTL.)                      (%)

1999                  14,032                1,480                         887                   59.93
2000                   8,494                2,310                       1,296                   56.10



                                                                                                        702
2001               12,158             2,296                 1,691     73.65
2002               11,777             3,698                 1,900     51.38
2003                   9,465          8,652                 7,085     81.89
2004               23,207            11,755                 5,690     48.40
2005               32,557            13,497                 6,866     50.87
Source: TARSİM



Table 6.7 Premium Incomes and Reimbursment Payments by Sub-Branches of
            Agricultural Insurance (000 YTL)
Years         000 YTL          Premium Incomes   Reimbursments Paid

        Hail-Greenhouse             815                  420
 1997   Animal Life                1,316               1,953
        Poultry Life                 58                   69
        Hail-Greenhouse            1,988               1,383
 1998   Animal Life                 881                1,327
        Poultry Life                130                   48
        Hail-Greenhouse            2,461               1,565
 1999   Animal Life                1,295                 744
        Poultry Life                179                  157
        Hail-Greenhouse            4,231               1,444
 2000   Animal Life                1,998               1,096
        Poultry Life                336                  220
        Hail-Greenhouse            4,494               1,260
 2001   Animal Life                3,803               1,973
        Poultry Life                358                  119
        Hail-Greenhouse            9,870               4,176
 2002   Animal Life                5,147               1,977
        Poultry Life                406                  321
        Hail-Greenhouse           13,474               5,205
 2003   Animal Life                6,426               6,164
        Poultry Life               1,232                 444
        Hail-Greenhouse           17,592              11,164
 2004   Animal Life               11,166               4,367
        Poultry Life                659                1,400
        Hail-Greenhouse           29,571              21,862
 2005   Animal Life               18,504               9,145
        Poultry Life                455                  162
Source: TSRSB




                                                                              703
7. Reinsurance
In the following table, the numbers of the reinsurance companies in Turkish insurance market
and of those reinsuring agricultural insurances are given for last eleven years. It is observed
that, while the underlined numbers were stable up to the year 2001, they have gradually
decreased from then on. By the year 2005, only one reinsurance company, Milli Re, stayed
in the agricultural insurance reinsurance market.


Number of Reinsurance Companies
                            1995 1996 1997         1998 1999 2000   2001 2002 2003   2004 2005
Reins. Companies                4     4        4    4    4    4      4    3    3      3      2
Reins. Companies in
the area of Agricultural        3     3        3    3    3    3      3    2    2      1      1
Insurance



Regarding the amount of premiums produced by reinsurance companies along the period of
1995-2005 the figures are given in the following table.


The Premium Production of the Reinsurance Companies
in the Branch of Agricultural Insurance, 000 YTL
               Total Premium        Growth Rate
      1995                 80                  -
      1996             244             204.12
      1997             330                35.35
      1998             512                55.10
      1999             630                23.04
      2000           1,008                59,93
      2001           1,185                17,56
      2002           1,023            (13,67)
      2003           1,262                23,36
      2004           1,168                (7,45)
      2005           1,515                29,75




  •    Private or public

The only reassurance company currently providing reinsurance in Turkish agricultural
insurance market, Milli Re, is a private one.




                                                                                          704
However, with the new adjustment in the agricultural insurance system, the Company
managing the Pool is authorize to make reinsurance contracts with domestic and foreign
companies and institutions in order to provide protection from national and international
insurance, reinsurance, capital and similar markets. In case that the protection provided from
those markets is considered as insufficient, the part to be determined by the Council of
Ministers is scheduled to be committed by the Government [Agricultural Insurance Law
(2005), Articles 15 and 16].


  •   Main re-insurers

Milli Reasurans is the main and the only re-insurer in the market. Even though three
reinsurance companies have participated in the market during the last decade, one of them
(Halk Reassurance) have had only symbolic amount of work and have left the market by
2001, and the other one (Destek Reassurance) is acquired by the leading company, Milli
Reasurance, at the beginning of 2005 (see the Table below).


Premium Production of the Insurance and Reinsurance Companies in the Branch of
Agriculture (000YTL)
                           1995 1996 1997 1998            1999   2000    2001     2002    2003    2004    2005

Total Amount of
Agricultural Insur.         606 1,748 2,190 3,000 3,937 6,566 8,655 15,424 20,586 29,417 48,530
Premiums

Destek Reassurance           2      7      13      44      38      69      86      118    130       -      **
Halk Reassurance             1      2       4       5      12      6        -       -       -       -      -
Milli Reassurance            77    235     314    464     581     934    1099      905    1,132   1,168 1,515

Total Amount of
Reinsur. Premiums           80     244     331    513     631    1009    1185     1,023   1,262   1,168 1,515
in Agriculture

** At the begging of 2005 Destek Reassurance is acquired by Milli Reasurance.
For further information on Milli Reasurans T.A.S. see original Fact Sheet or Milli Reassurans web
page, http://www.millire.com



  •   Reinsurance rates

In Turkish agricultural reinsurance market, both stop-loss and proportional arrangements are
made so far. While insurers are inclined to prefer stop-loss; reinsuring companies rather
prefer proportional contracts.


While proportional reinsurance is more common on the market, the rates are as follows2:

           2
Table 1.       These are not official figures, but the experts’ ideas from the sector.


                                                                                                         705
   •   About 20 to 50 % (an average could be guessed around 30%) of the premiums and
       losses are assumed by the insurance company.
   In other words,
   •   About 50 to 80 % (an average could be guessed around 70%) of the premiums and
       losses are assumed by the reinsurance company.


Rates for stop-lossare extremely varied and it is not possible to give any narrow range or an
average figure. Some statistical data are shown on the tables below.


Consolidated Profit & Loss Account of Non-Life Branches (Companies) (31.12.2005) (YTL)
TECHNICAL INCOME                                                              18.294.112
A.) WRITTEN PREMIUMS (NET)                                                    18.196.039
a.)Written Premiums (Gross)                                                   48.530.480
b.)Premiums Ceded to Reinsurer (-)                                            30.334.440
B.) PROVISIONS FOR UNEARNED PREMIUMS (NET) (-)                                 3.884.508
a.)Provisions for Unearned Premiums (Gross) (-)                               12.903.224
b.)Provisions for Unearned Premiums (Reinsurer's share)                        9.018.716
C.) PROVISIONS FOR UNEARNED PREM. BROUGT FORWARD (NET)                         2.944.431
a.)Provisions For Unearned Premiums Brought Forward (Gross) (-)                8.866.416
b.)Provisions For Unearned Premiums Brought Forward (Reins. share) (-)         5.921.985
D.) CHANGE IN PROVISION FOR UNEXPIRED RISKS                                            -
E.) INVESTMENT INCOME TRANSFERRED FROM NON-TECHNICAL SECTION                     194.080
F.) OTHER TECHNICAL INCOMES                                                      844.069
TECHNICAL EXPENSES                                                            20.349.654
A.) PAID LOSSES (NET) (-)                                                     12.978.951
a.)Paid Losses (Gross) (-)                                                    31.169.034
b.)Paid Losses (Reinsurer's share)                                            18.190.083
B.) PROVISION FOR OUTSTANDING LOSSES (NET) (-)                                 3.117.025
a.)Provisions for Outstanding Losses (Gross) (-)                              16.487.596
b.)Provisions for Outstanding Losses (Reinsurer's share)                      13.370.571
C.) PROVISION FOR OUTSTANDING LOSSES BROUGHT FORWARD(NET)                      1.747.405
a.)Provisions for Outstanding Losses Brou. Forw.(Gross)                        8.776.841
b.)Provisions for Outstanding Losses Brou. Forw.(Rein. Share) (-)              7.029.436
D.) CHANGE IN PROVISION FOR BONUSES&REBATES                                            -
E.) CHANGE IN OTHER TECHNICAL PROVISIONS                                               -
F.) OPERATING EXPENSES (-)                                                     6.001.083
TECHNICAL PROFIT/LOSS                                                         -2.055.542
Source: TSRSB


Consolidated Profit & Loss Account of Non-Life Branches (Reins. Comp.) (31.12.2005) (YTL)
TECHNICAL INCOME                                                                 870.565
A.) WRITTEN PREMIUMS (NET)                                                       826.855
a.)Written Premiums (Gross)                                                    1.515.477
b.)Premiums Ceded to Reinsurer (-)                                               688.622
B.) PROVISIONS FOR UNEARNED PREMIUMS (NET) (-)                                    33.500
a.)Provisions for Unearned Premiums (Gross) (-)                                   60.389
b.)Provisions for Unearned Premiums (Reinsurer's share)                           26.889
C.) PROVISIONS FOR UNEARNED PREM. BROUGT FORWARD (NET)                            45.486
a.)Provisions For Unearned Premiums Brought Forward (Gross) (-)                   76.416
b.)Provisions For Unearned Premiums Brought Forward (Reins. share) (-)            30.930
D.) CHANGE IN PROVISION FOR UNEXPIRED RISKS
E.) INVESTMENT INCOME TRANSFERRED FROM NON-TECHNICAL SECTION                      37.459
F.) OTHER TECHNICAL INCOMES                                                        5.734
TECHNICAL EXPENSES                                                               763.470

                                                                                           706
A.) PAID LOSSES (NET) (-)                                                           476.945
a.)Paid Losses (Gross) (-)                                                          862.147
b.)Paid Losses (Reinsurer's share)                                                  385.202
B.) PROVISION FOR OUTSTANDING LOSSES (NET) (-)                                      199.760
a.)Provisions for Outstanding Losses (Gross) (-)                                    351.221
b.)Provisions for Outstanding Losses (Reinsurer's share)                            151.461
C.) PROVISION FOR OUTSTANDING LOSSES BROUGHT FORWARD(NET)                           184.595
a.)Provisions for Outstanding Losses Brou. Forw.(Gross)                             324.320
b.)Provisions for Outstanding Losses Brou. Forw.(Rein. Share) (-)                   139.725
D.) CHANGE IN PROVISION FOR BONUSES&REBATES                                               -
E.) CHANGE IN OTHER TECHNICAL PROVISIONS                                                  -
F.) OPERATING EXPENSES (-)                                                          271.360
TECHNICAL PROFIT/LOSS                                                               107.094
Source: TSRSB


Formerly the accounting system (and format of the data series) was different. The figures for
for the two previous years are presented to give an idea of reinsurance rates over time.


CONSOLIDATED PROFIT/LOSS ACCOUNTS OF INSURANCE COMPANIES OPERATING
IN AGRICULTURAL INSURANCE BRANCH (by the end of the year) (000 YTL)
                                                                         2003         2004
Technical Incomes
A. (1+2+3) Technical Reserves Brought Forward                               5,889       17,216
1. Reserves For Unexpired Risks Brought Forward from Previous Year          2,757        4,252
2. Reserves for O/S Losses Brought Forward from Previous Year               3,132       12,964
3. Reserves for Long Term Business Brought Forward from Previous Year           -               -
B. Premiums Received                                                      20,586        29,147
C. Commissions Received                                                     2,928        4,138
D. Reinsurers Share in Losses Paid                                          8,377        9,643
E. Reinsurers Share in Technical Reserves                                 14,971        13,233
1. Reserves for Unexpired Risks                                             3,094        5,835
2. Reserves for O/S Losses                                                11,877         7,399
3. Reserves for Long Term Business                                              -               -
F. Other Incomes                                                             296              536
I. Total Technical Incomes                                                53,047        74,183
Technical Expenditures
A. (1+2+3) Reinsurers Share in Technical Reserves Brought Forward           4,888       14,831
1. Reserves for Unexpired Risks                                             2,136        3,083
2. Reserves for O/S Losses                                                  2,752       11,748
3. Reserves for Long Term Business                                              -               -
B. Premium Ceded to Reinsurers                                            13,449        18,055
C. Commissions Paid                                                         3,032        4,355




                                                                                              707
D. Losses Paid                                                                                           11,682              16,931
E. (1+2+3+4) Technical Reserves                                                                          17,290              17,914
1. Reserves for Unexpired Risks                                                                           4,251               8,774
2. Reserves for O/S Losses                                                                               13,039               9,140
3. Reserves for Long Term Business                                                                                 -                -
4. Earthquake Loss Reserve                                                                                         -                -
F. Other Expenditures                                                                                         700                 881
II. Total Technical Expenditures                                                                         51,041              72,967
III. Technical Profit / Loss for Non-Life Branches                                                        2,006               1,216
Source: TSRSB


8. Alternative risk management tools

Any support to agricultural sector may be considered as a tool to alleviate the income
fluctuations caused by the fragile character of the sector both on the economic and on the
technical dimensions. Thus, before detailing the disaster and calamity payments it could be
of interest to have a look at the general picture of the subsidies in the Country (Table 8.1).

Table 8.1 Evolution of the Subsidies to Agriculture in Turkey (Billion TL)
Type of Subsidy                              1995        1996        1997        1998 1999 2000 2001 2002

Price Support                                   83        182         570        1,318 1,488 1,595 1,836 1,735
Input Subsidy                                   11         48          89         135        110        110        93         0
Animal Production Support                        0          0           0            0         0        12         41        56
Incentive Premiums                               2          5           6            8        10         12        12         0
Compensation payments
  - Pruning – Tea                       1            2           2           4           3         16         27        40
  - Quota – Tobacco                     2            4           6           0           0         0          0         0
  - Disaster aid                        1            1           5           8           16        13         0         0
   TOTAL                                         4          7          13          12         19         29        27        40
Used from DFIF                                   3         39         111         239        385        385        24         0
Deficiency Payments (Premiums)                   1          0           5            0       111        184       338       107
Direct Income Support                            0          0           0            0         0          0        84 1,092
Paid by the State Agric. Bank                    0          0           0            0         0         87       262         0
GENERAL TOTAL                                 104         281         794        1,712 2,123 2,414 2,717 3,030
GENERAL TOTAL (Million USD)                 2,300        3,500       5,200       6,600 5,100 3,900 2,200 2,000
Fiyat Desteği hanesinde yer alan destek miktarları azami desteği göstermektedir.
Source: MARA, Treasury



                                                                                                                                  708
   8.1. Ad-hoc measures (extraordinary disasters): average expenditure
        in the last 10 years, delay to pay.

In Turkey, there existed two disaster aid programs, based on two specific laws.

Law on Lending of Seeds to the Needy Farmers (Law number 5254) enacted in 1948 has
been repealed in 2001. This law provided aid to the farmers whose crop had been
damaged to at least 40% because of natural disasters, and who do not have seeds and
opportunity to borrow seed credit.



Law on the Aid to the Farmers Affected By Natural Disasters (Law number 2090) enacted
in 1977 is still in force and it concerns the aids and technical supports to be given by
Government to farmers and agricultural production cooperatives whose farms,
agricultural products, livelihood stocks, and production means and facilities are
damaged or completely vanished because of fire, earthquake, landslide, storm, flood,
frost, hail, drought, pests and diseases etc., and whose working and production
conditions are collapsed to a significant degree. Nevertheless, the Article 17 of the
newly published Law of Agricultural Insurance put a condition on this Law of disaster
aid, stating that it shall not be applied to farmers who do not have agricultural
insurance for the risks of implementation year under the scope of the Law of
Agricultural Insurance.


State support under the Law number 2090 is realized by one of these methods:
provision of credit, donations of goods or cash, technical aid, or participation in the
cost of the installations to be rebuilt or repaired.


Table 8.2 Disaster Payments to Farmers in Turkey

                               Disaster payments for:
                            5254       2090             Total
   1996    billion TL        825          22             847
           '000 USD        10,150       271         10,421
   1997    billion TL       5,352        8.4            5,360
           '000 USD        35,303         55        35,359
   1998    billion TL       7,726       192             7,918
           '000 USD        29,568       735         30,303
   1999    billion TL      11,331         28        11,359
           '000 USD        27,008         66        27,074
   2000    billion TL       9,165     1,248         10,413
           '000 USD        14,831     2,020         16,850



                                                                                   709
   2001    billion TL           0       316          316
           '000 USD             0       257          257
           billion TL           0       500          500
   2002
           '000 USD             0       332          332
           billion TL           0       450          450
   2003
           '000 USD             0       301          301
           billion TL           0    50,479       50,479
   2004
           '000 USD             0    34,911       34,911
           billion TL           0       524          524
   2005
           '000 USD             0       390          390
Source: MARA



The amounts of the payments under the schemes carried out concerning the Laws
number 2090 and 5254 are given in Table 8.2. As can be inferred, while these
payments have been costly for the Government in certain years; they didn’t really
answer the farmers’ needs. Besides what the figures reveal, the Government aid is
generally paid quite late. There are no records on the range of actual delays, but it’s
being pronounced that many times the payment is realized only after years from the
damage.



   8.2. Calamity funds regularly fed, average expenditure in the last 10
        years, delay to pay.

While communicating the alternative risk management tools in Turkish agriculture, it would
be accurate to mention the Government payments Under the Law on Animal Health and Its
Command number 3285. This Law is enacted in 1986 to bring about some changes in and to
replace the former one of number 1234 dating back to 1928. The payments made to farmers
under either of these Laws so far amounts to a considerable sum.
The aim of the Law on Animal Health and Its Command is to facilitate the protection from the
diseases that can be transmitted from animals and animal products to human beings and
animals, and to enable the control of the contagious animal diseases.
According to the Article 41 and 42 of the Law, under certain conditions, a compensation
payment by the Ministry of Agriculture is provided to the owner of the animals exterminated
or slaughtered for having one of the certain diseases declared in the Law. The stated
conditions relates to the taking of necessary precautions by the owner both to avoid and to
proclaim the disease. The amount of compensation equals from half to whole of the value of
the animal, according to the context.
Total amounts of the payments made under the Law number 3285 in last six years are given
in Table 8.3 It is evident that, in years, the related compensation payment costs too much to
the Government. Actually, the new law of Agricultural Insurance doesn’t repeal or bring
limitations on this Law.


                                                                                        710
Table 8.3 Compensation Payments under the Scheme of Animal Health and Control
Law
                                        Amount of the Compensation
 Years       Number of Animals
                                            Payments (YTL)

 2000                    1,844                           424,114
 2001                    2,765                           710,643
 2002                      173                            81,180
 2003                      442                           436,137
 2004                      741                           992,541
 2005                   12,236                         3,263,475
Source: MARA


   8.3. Mutual funds

Not used by farmers; only available for Reinsurance firms.



   8.4. Non monetary tools

Other than the new States support to insurance premiums and disaster payments made so
far, in Turkish agriculture, there exist two additional instruments that may be used against
risk. There are:
   a) Futures and Options Market
   b) Licensed Warehouse procedure


Futures exchange, which offer an opportunity to farmers to protect themselves from price
risks, have started functioning in 2005. In this system which is, at the moment, available only
for wheat and cotton marketing, farmers have a chance to protect from price risks through
buying and selling contracts much before the planting or the harvest. However, since the
average farm size in Turkey is extremely small and the level of education and consciousness
is insufficient among farmers, participation in the system by farmers is rare.
Legislation in the area of licensed warehouse is completed in the year 2005. Yet, it is still to
be practiced. In this system, after the harvest, the farmers will be able to trust their products
to licensed warehouses and in return they get warehouse receipts. Then, they will be
capable of using the receipts to have access to credit sources. The improvement expected to
be brought about with this system in terms of farmers’ risk management is two fold. On one
hand, the farmer will not be obliged to sell his product at low prices at harvest time resulting
from large amounts supply (reduced price risk); on the other hand, as the warehouses are
expected to have international standards, it will be more secure for the farmers to deliver and
store up their products in such safe places (reduced risks of fire, perishing etc.) The fact that


                                                                                            711
the goods stored in licensed warehouses will be insured represents an additional advantage
of the system. Nevertheless, as mentioned above, this system is not practiced yet.
Both the futures market already in practice and the still to function licensed warehouse
system are established/will be established in private company status. Thus, contributions of
these systems to the sector will not have public character.



9. Changes undergoing the system.


History of the Agricultural Insurance in Turkey

In Turkey, endeavor in the area of Agricultural Insurance have started at the early years of
the Republic. Various institutions have put efforts in the subject and have carried out altruistic
studies. For the first time, the topic is dealt with in the TR Bank of Agriculture Act, enacted in
1937 (Law number 3202). Agricultural insurance in discussed in the 1938 Congress of
Village and Agriculture. In this period, legislative aspect of the agricultural insurance is
adjusted by the articles number 1316 and 1319 of the Turkish Commercial Code. Even if, in
the article 1316, it is stated that the “all varieties of products as reaped or non-reaped, and all
domestic animals shall be insured against pests and diseases at any time of the year.” and
that “agricultural products shall be insured against all kinds of hazards”, up to date, insurance
of the agricultural products against risks other than hail (flood, drought, wind storm, diseases,
pests etc) have not been possible. These articles have formed the legal basis of the
agricultural insurances until 2005, and private insurance companies have enacted insurance
policies, upon the payment of 100% of the premium by the farmer. Insurance of the plant
products have started with hail insurances in 1957 by the Şeker Insurance. This company
has insured sugar beat and grains in the cities where sugar beat is grown.

In 1960, Başak Insurance started issuing hail and livestock life insurances. Along the
following years, some other insurance companies have also have registered for working in
the area of agricultural insurance. In 1985, poultry life insurance; in 1986, aquaculture
insurance; and in 1990, insurances of hail, frost, flood, storm and fire for glass made
greenhouses have been initiated. It is known that, at the beginning, the livestock life
insurances were only as directed to the livestock bought by the credit obtained from the TR
Bank of Agriculture and applied because of the obligation imposed by the Bank. In the last
decade, the scope of the agricultural insurances both for open area and for greenhouse
products have been expanded in practice to cover, together with hail, fire and in some
regions frost. In the 2000s, about 15 companies display activity in the area agricultural
insurance. Nevertheless, for none of these companies agriculture is a branch with a
considerable share of total premiums. Share of the agricultural insurance premium incomes
within the total is only about 0.5%. When the weight of the agricultural sector in national
economy is considered, this figure may be qualified as unsatisfactory. Besides, in Turkey,
even whole of the insurance sector has still long way to go. To resume, in Turkey, currently
only 1.8% of the total arable area (24.4 million ha) and 0.3% of the livestock assets are
insured.


                                                                                              712
Factors Hindering the Development of Agricultural Insurance in Turkey

The principle factors binding the development of agricultural insurance in Turkey during the
past may be listed as, small farm scale and the resulting low level of farmers’ incomes;
considerable ignorance and disinterest on the subject both in agriculture and in the insurance
industry; and the failure of successive governments to develop coherent agricultural policies
over the years. A concrete proof of the latter is the non-appearance of an agricultural
insurance law up until 2005. In addition to the listed, even if the data on the frequently
encountered risk events of hail, frost, drought and precipitation are collected by numerous
meteorological stations all over the country, backward data on the damages caused by these
risks on the product and place basis have been inexistent. Thus, for the companies, it was
not feasible for long time to establish the insurance programs relating to these risks. Low
level of education among farmers, and the fact that the agricultural insurance is a hard
branch requiring expertise and providing little profit for insurance companies, have also
hindered these parties from assuming the leader position for the development of the sector.

On the other hand, the Governments have long compensated farmers against negative
effects of the natural disasters. Lending seeds, and young plants, postponing or even
partially or totally canceling credit debts and taxes, provision of subsidies for agricultural
inputs, lending cheap operation credit were common practices in helping farmers who suffer
from disasters. The Law number 5254 of the year 1948, and the one with number 2090
enacted in 1977 established the legal basis for Government aid to the farmers affected by
the natural disasters. These Laws were acting as a kind of free public insurance. However,
as that was not a convenient way of transferring risks, the budget deficits caused these Laws
to lose their operability over time. The Law number 5254 has been repealed in 2001.
Annulations of the Law number 2090 for the insurable cases, on the other hand, have been
possible only by the Agricultural Insurance Law.



Foundation and the Accomplishments of the Agriculture Insurances Foundation (TSV)

Despite many obstacles, Turkey has largely resolved the problems involved in hail and
greenhouse insurance with a model formulated according to local conditions since the
establishment of the Agricultural Insurance Foundation (TSV) in 1995. The infrastructure
activities (risk assessment organization, independent damage assessment organization, data
bank, geographical information systems, and risk analysis-assessment-actuarial, reporting
and publication, and training support services) that TSV carried out to set up the basis of a
pool system have been recognized internationally. The technical infrastructure needed for
frost, flood, drought, and similar risks has been created and the efforts by the Foundation
have had a fundamental contribution to the preparation process of the specific Law of
Agricultural Insurance.



Way to the enactment of the Law of Agricultural Insurances



                                                                                         713
Actually, various entities and institutions have prepared drafts of agricultural insurance law
from 1940 to 1995. Nevertheless, none of these draft works have been able to become a
law. In the Government Program of 1998, within the framework of “Structural Change Project
on the Agricultural Policies”, “Draft Law on the Promotion of Agricultural Insurances” has
been laid out, however, the Law was not enacted, the reason being lack of budget resources
in order to support the premiums of the farmers. Finally, the draft of the current Law has
been prepared in 1999 by three different institutions (The MARA, TSV and the
Undersecretariat of Treasury). Agricultural Reform Implementation Project (ARIP) prepared
in 2000 by the IMF and the WB as connected with the economical crises, included a
reference to the establishment of the legal basis for Government support to agricultural
product insurance. In the ARIP project document, it has been suggested to start the
“Government Subsidized Agricultural Insurance Projects” within the time span pledged to the
WB. In the year 2002, legislation studies for the agricultural insurance law have been placed
in the 58th Governments’ Emergency Action Plan.



Final Situation: Novelties Brought About by the Law of Agriculture Insurances

The Law for Agriculture Insurances expected for long years has been approved and put into
effect on 14 June 2005. Agriculture Insurances Technical Study Groups established by the
TSRSB and TSV have supported code draft studies by collective effort.

This Law, Number 5363, in addition to Hail insurance available in Agriculture, foresees the
government to support the insurance premium of the farmer, providing the freezing, torrent,
drought risks to be included in the coverage. The Law, legalized to establish a Pool system
under the joint management of the relevant institutes of insurance sectors by developing the
available systems.

At the present practice, besides ten insurance companies issuing policies in the Agriculture
Insurance branch, 6 more insurance companies received licenses in Agriculture Insurance
branch. These companies came together and established a Joint Stock Company under the
name TARSIM (Agriculture Insurances Centre) as a Pool Operator Company.

The Pool is to be managed by a committee consisting of a total of seven representatives two
from the MARA, two from the Treasury and one from the Association of Agriculture
Chambers of Turkey (TZOB), one from TSRSB and one from the Pool Operator Company
(TARSIM). In the Pool, services regarding Agriculture Insurances are to be carried out by an
operator company to be established by insurance companies.

The responsible establishment shall be the Ministry of Agriculture and the insurance
procedures shall be carried out by the Insurance Companies partner to the Operator
Company under the same principles and to be inspected by the Treasury.

According to Law, insurance companies may issue their own policies. The premiums paid by
the farmer to the insurance companies, the procedures of depositing in the Pool the
supporting premiums paid by the government, and services for providing reinsurance are
other duties to be undertaken by the Operator Company on behalf of the Pool. Furthermore,



                                                                                         714
indemnities specified as the result of damage inspections shall be paid directly to the farmer
by the Operator Company.

Risk analysis, claim organization and research-development studies carried out by the TSV
so far are expected to be continued by the Pool Operator Company, and the training and
publication services to be executed by the Foundation.

Within the framework of the Law for Agriculture Insurances No. 5363, two regulations have
been published and put into force, one of which was prepared by the General Directorate of
Insurance of the Turkish Treasury and the other by the Ministry of Agriculture.

In order to enable the Pool services to be carried out more rapidly, both TARSIM and
“Vegetable Products Insurances Study Group” and “Farm Livestock Insurances Study Group”
constituted by the Committee of Agricultural Analysis and Research Committee of the
TSRSB, immediately after the effectiveness of the code for Agricultural Insurances, prepared
“Drafts for general terms of Agricultural Insurances”. Joint studies of the TSRSB Agricultural
Committee with the insurance companies, TSV and TARSIM are proceeding.

According to Turkish Agricultural Strategies: 2006-2010, a report prepared in accordance
with EU directives and World Trade Organization decisions, government support for the
agricultural insurance system is to be provided in the form of subsidies consisting of a 5%
share of total agricultural subsidies (but not less than 1% of GNP). Considering that to date
the Turkish insurance industry has never received any kind of government support, the
introduction of this law will mark the beginning of a brand-new process in which important
developments may be expected.




                                                                                         715
Public-Private Partnerships for Risk Management in Agriculture: Turkish
Experience*
After several unsuccessful attempts for the establishment of a sound agricultural insurance system in
Turkey, long-expected agricultural insurance law allowing public-private partnership, offering technical
and economic resources to preserve the agricultural sector from suffering under difficult conditions,
finally was passed on 14.06.2005.

Aim of the Agricultural Insurance Law No. 5363

Determination of procedures and principles regarding the implementation of agricultural insurance in
order to compensate farmers for losses occurring in their agricultural activities due to natural risks.

Legal Regulations for the New Agricultural Insurance System

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

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

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


Institutions Involved in the New Agricultural Insurance System of Turkey


             Government                  Private Sector                 Organizations
                                                                      (Insurance and Agriculture)




     Ministry of      Undersecretariat      Insurance          Association of the        Union of the Turkish
   Agriculture and     of the Treasury      Companies      Insurance and Reinsurance         Chambers of
    Rural Affairs                                            Companies of Turkey             Agriculture




                                           Agricultural
                                          Insurance Pool

                                            TARSIM


                                              TSV




Agricultural Insurance Pool

    -      Management Committee
       -   Managing Company (TARSIM)


Members of the Management Committee (7) :

    •      Ministry of Agriculture and Rural Affairs (2)



                                                                                                                716
      •     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.
      •     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 writing
agricultural business in order to carry out all tasks of the Pool, within the context of the law. Insurance
companies (presently 16) participate to TARSIM 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.
  •        Implementing the decisions taken by the Management Committee and fulfilling the secretarial
          works of the Pool.
  •         Collection of the premiums and payment of indemnities.
  •         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.



                                                                                                       717
 •         Making suggestions to the Management Committee in necessary cases.
 •         Carrying out all other works and operations related to the management of the Pool.



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.




TURKISH AGRICULTURE INSURANCE ORGANISATION 2005

                                               PRIME MINISTRY
                                               Turkish Treasury


              AIF
     AGRICULTURAL INSURANCE                                       INSURANCE
      FOUNDATION (VAKIF-TSV)               Reinsurance            COMPANIES
                                           Companies
         Loss Assesment Organization                               Underwriting
         Risk Inspection Organization                               Marketting
          Research and Development                                     Sale
          (Data collection, Databank,                             Claim Payment
              GIS, Risk Analysis)
               Training Support
                                                                   payment
                                                                             Claim




                                                                                     Premium




            INFRASTRUCTURE
             FOR AGROPOOL


                                                                      Farmers



Source: TSV


ORGANISATION of the NEW GOVERMENT SUBSIDIZED AGRICULTURE INSURANCE IN
TURKEY 2006




                                                                                                  718
            Ministry of                                                                      PRIME MINISTRY
          Agricultural and                                                                   Turkish Treasury
        Rural Affairs (MARA)


                                          AGRICULTURAL INSURANCE
                                                  POOL “Board”
                                       (Ministry of Agricultural and Rural                          INSURANCE
                        Premium
                                    Affairs, Prime Ministry Turkish Treasury,                       COMPANIES
                        Subsidies       Association of the Insurance and
                                                                                  Reinsurance           •             Unde
                                       Reinsurance Companies of Turkey,
                                          Union of Turkish Chambers of            Companies                           rwritt
                                    Agriculture, Administation and Services                                           ing
                                           Company for Pool-TARSİM)
                                                                                                        •             Mark
                                       TARSİM_ADMINISTRATION AND
                                        SERVICES COMPANY FOR POOL




                                                                                                            Premium
              AIF
   (AGRICULTURAL INSURANCE
       FOUNDATION, TSV)                  •      Loss Assesment Organization       Premiums
          Training for:
          Loss adjusters                 •      Risk inspection Organization
  Risk inspectors and Insurance          •      Research and Development (Data    Claim Payment       Farmers
              sector                            collection, Databank, GIS, Risk
                                                Analysis)



Source: TSV



Basic Elements of the New Agricultural Insurance System in Turkey

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,
agricultural machinery and livestock shall be determined by the Council of the Ministers based on the
proposals of the Management Committee of the Pool.

Participation

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

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

Marketing and Sale of Insurance

Sales and marketing activities shall be carried out by the traditional way and means of the insurance
sector:

    •      Insurance Intermediaries

    •      Other Sales Channels of insurance companies

Insurance contracts shall be issued with the name of the underwriting insurance company according to
the conditions and 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


                                                                                                                               719
       automatically for the rest of the risks.

   •   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 Government.

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.



* This is a quasi identical quotation from the presentation by the Author, and is attached in this
box for informative purposes only. Its identical use for publication may not be acceptable.
Source: Bülent BORA, (Director General, TARSIM (Agricultural Insurance Pool Management, Turkey),
Global Conference on Insurance and Reinsurance Pools for Natural Catastrophe Risk, 8-9 December
2005 – İstanbul.




                                                                                                   720
10. Annex: Technical Forms


1- PLANT PRODUCTS INSURANCE
Product covered (crop type, livestock, income): All plant products (field crops, fruits and
vegetables). Greenhouses and the products grown within greenhouses are covered by the State
Supported Greenhouse Insurances and are thus out of the scope of this insurance.

Only the main product is covered. For example: Straw is not considered as main product, and not
covered.
Peril/damage covered (or Multi-peril). Is it insurance on yield? Is there a list of specific perils
covered? : The coverage shall be determined annually by the Council of the ministers.

For the year 2006, this insurance provides cover for hail, fire, storm, tornado, landslide and frost
risks. Coverage for frost insurance is only available in 90 towns.
The farmers should be registered in the Farmers Registration System. As the sum insured is
estimated by multiplying the price of the product and the expected yield, and the damage is
determined according to the loss of yield, it may be considered as an insurance on yield.
Technicalities:

Index-based? (computed on meteo data, satellite images, etc….): This insurance is not index based.

Can a farmer insure only part of the fields?        Yes     No

Loss estimation per field or per farm?: Losses are estimated on per field basis.

Triggers: which is the minimum loss above which the farmer is compensated?:

See Franchise (below).

Method to calculate the reimbursement: The sum insured is estimated by multiplying the price of the
product mentioned in the policy and the expected yield. The damage is determined according to the
loss of yield determined by the experts of the pool on the sight, and agreed upon by both parties.
Reimbursement is estimated by multiplying sum insured (minus deductibles) and loss of yield ratio
(determined as over the sum insured) and the premium rate. Premium rates are determined
according to the product, place and the coverage and listed in percentages.

Compulsory for the farmer?      Yes            No

Is there a bonus-malus system?        Yes            No

There isn’t a bonus-maus system yet, but it’s being planned. There is demand by farmers.

Time from the harvest/damage until payment of indemnity (specify if it is maximum or average)

Before the new Government Subsidized Agricultural Insurance scheme came in to force, delays in
the payments were varied. There are no official figures on the maximum or average times from
harvest/damage to the payment of indemnities for that period.
According to the General Conditions for the current insurance scheme (came in to force by 1st


                                                                                           721
.06.2006), for the Crop Insurances, the CLAIM should be made in 5 working days, at latest; and after
the fixing of damages by the expert commissioned by TARSİM and determination of the amount of
indemnity to be paid, the payment to the insured party, again by TARSİM and via bank, is realized in
30 days, at latest. In the case of partial losses during the insurance period, the sum of the losses are
paid at one go, after the harvest.
Geographic detail used by companies to determine tariffs.: For the Government Subsidized Plant
Products Insurances, the premium rates or tariffs are determined in percentages based on products
and hazard regions (23 regions are determined from A to Z). A list of corresponding hazard regions
per each village is provided under the text of general conditions. In addition, deadlines (day/month)
for insurance applications for each product are determined per cities.
Franchise (%). Does it coincide with the trigger? Yes.

Excess in Plant Product Insurances: Excess is applied in form of deductibles, and not as
franchise. In the Plant Products Insurances, rates of deductibles are determined according to the
product groups and types of coverage. Currently the following rates are practiced.
Deductibles in Plant Product Insurances
Coverage                 Field crops, Seedlings, Saplings       Fruits, Vegetables, Indoor plants
                         Deductibles in Partial loss (%)        Deductibles in Total loss (%) Deductibles
in Partial loss (%)      Deductibles in Total loss (%)
Hail                     10                    15               15                  20
Fire                     10                    15               15                  20
Land Slide               10                    15               15                  20
Storm                    20                    25               20                  25
Tornado                  20                    25               20                  25
Frost (in 90 towns)      20                    25               20                  25



Public involvement (subsidies to premiums, re-insurance, regulations)

       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. For the year 2006, the State’s contribution to the premiums paid by
       farmers is fixed at 50%, without differentiating among crops, risks, regions and farm size.
       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.
Coverage in area, number of farms or value (specify and give all values if possible)

The Government Supported Plant Products Insurance is a new insurance product. The risks covered
are increased in number and the premiums are subsidized. Thus, there are no figures on the size of
the coverage for this insurance product. Following are the figures (given also in Section 5) for the old
hail insurance.
Coverage in area and value

                          Number of Policies        Alan (ha)   Sum Insured (million YTL)



                                                                                              722
 Plant Poduction Insurances
 - Hail                     62,397                   58,800              375,0
 - Hail+Fire**              46,370                   250,714             257,8
 - Frost                    2,090                    2,433               26,0
** For total policies, data include only those obtained from Başak and Güven insurance companies.

Source: TARSIM, TSRSB

Sources: TSV, TARSİM, TSRSB




                                                                                                    723
2-GREENHOUSE INSURANCE
Product covered (crop type, livestock, income): Greenhouses (other than those having wooden
frames) having either plastic or glass cover and the products grown within.

Peril/damage covered (or Multi-peril). Is it an insurance on yield? Is there a list of specific perils
covered?: The coverage shall be determined annually by the Council of the ministers. For the year
2006, this insurance provides cover for hail, fire, storm, tornado and landslide risks. The farmers
should be registered in the Farmers Registration System. It is an insurance both on yield and per
greenhouse construction.
Technicalities:

Index-based? (computed on meteo data, satellite images, etc….): This insurance is not index based.

Can a farmer insure only part of the fields?          Yes         No

Loss estimation per field or per farm?: Losses are estimated on per greenhause basis.
Triggers: which is the minimum loss above which the farmer is compensated?:
See Franchise (below).
Method to calculate the reimbursement: The sum insured covers:
a) Total value of the greenhouse, including the cover, frame and other construction materials, and the
labor of construction,
b) Value of the essantial components of the greenhouse, such as, heating, airconditioning, fertilizing,
spraying and irrigation installations
c) Value of the expected production at the end of the production period, or in case, sum of the
production values of various crops within the insurance period (prices of the products mentioned in
the policy multiplied by the expected yields).
The damage is determined according to the loss of yield determined by the experts of the pool on the
sight, and agreed upon by both parties.
Reimbursement is estimated by multiplying sum insured (minus deductibles) and loss of yield ratio (a
separate ratio per each component of the greenhouse over their respective sums insured) and the
premium rate.
Compulsory for the farmer?          Yes         No

Is there a bonus-malus system?            Yes          No

Nevertheless, there are differentiated premium rates for different risk groups. These are mentioned in
the following table.
Price Reductions According to the Risk Classes of Greenhouses
Risk classes                                                Reductions in premiums   (for Product and
Cover)
            Hail, Fire, Landslide                           Storm, Tornado
1           20%                                             40%
2           10%                                             20%
3           No reduction                                    No reduction
                                                 rd
4          Premium rates are the same as the 3 group No storm coverage is available. For tornado,
premium rates are the same as the 3rd group



                                                                                             724
Price reductions according to the risk classes of greenhouses will not be applied for frame and
technical equipment.


Time from the harvest/damage until payment of indemnity (specify if it is maximum or average)
Before the new State Subsidized Agricultural Insurance scheme came in to force, delay in the
payments were varied. There are no official figures on the maximum or average times from
harvest/damage to the payment of indemnities for that period.
According to the General Conditions for the current insurance scheme (came in to force by 1st
.06.2006): For the Greenhause Insurances, the CLAIM should be made in 24 hours, at latest; and
after the fixing of damages by the expert commissioned by TARSİM and determination of the amount
of indemnity to be paid, the payment to the insured party, again by TARSİM and via bank, is realized
in 30 days, at latest. In the case of partial losses during the insurance period, the sum of the losses
are paid at one go, after the harvest.
Geographic detail used by companies to determine tariffs.
For the Government Subsidized Greenhouse Insurances, the premium rates or tariffs are determined
in percentages based on products and hazard regions (23 regions for hail, fire and landslide; 10
regions for storm and tornado). For hail, fire and landslide risks, regional coefficients to be applied to
cover, products and technical equipment are determined seperately. In the case of storm and
tornado, different coefficients are used for glass cover and for plastic cover, for products, for frame
and for technical equipment.
Franchise (%). Does it coincide with the trigger?
Excess and Coinsurance in Greenhouse Insurances: In the Greenhouse Insurances, losses less
than the following deductibles over the insured sums are not reimbursed. This applies for each of
the insured components such as, cover, product, frame and technical equipment.
Deductibles in Greenhouse Insurances
  Type of Greenhouse Deductibles (in % over the sum insured) per Green House Component
                Cover         Product         Frame          Technical equipment
  Glass         2%            2%              2%             2%
  Plastic       5%            5%              5%             5%
In addition, as a coinsurance, %10 of all the losses in the greenhouses with glass cover and %20 in
plastic shaded ones is under the responsibility of the insured party.
Public involvement (subsidies to premiums, re-insurance, regulations)

    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. For the year 2006, the State’s contribution to the premiums paid by
    farmers is fixed at 50%, without differentiating among crops, risks, regions and farm size.
    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.
Coverage in area, number of farms or value (specify and give all values if possible)
The Government Supported Greenhouse Insurance is a new insurance product. Thus, there are no
figures on the size of the coverage for this insurance product. Following are the figures (given also in


                                                                                             725
Section 5) for the old greenhouse insurance, which was not government subsidized.
Coverage in area and value
                           Number of Policies       Alan (ha)          Sum Insured (million YTL)
 Greenhouse insurance      6,879                    3,985              224,6
Source: TARSIM
Sources: TSV, TARSİM, TSRSB
3- LIVESTOCK LIFE INSURANCE
Product covered (crop type, livestock, income): Dairy cows registered in the pro family register or
family register, as long as the production conditions correspond to a long list of preventive sanitary
measures.

Peril/damage covered (or Multi-peril). Is it a insurance on yield? Is there a list of specific perils
covered?

The coverage (animals covered) shall be determined annually by the Council of the ministers.
For the year 2006, this insurance provides cover for damages resulting from death or obligatory
slaughter of dairy cows, because of;
    a) All types of animal diseases, pregnancy, birth or surgical operations,
    b) All types of accidents, bittings of snakes and insects,
    c) Poisinings due to venomous meadow herbs and feeds,
    d) All types of natural disasters and sunstroke,
    e) Fire or explosion
It is obligatory to make the cows swallow magnet.
Contagious diseases obligatory to declare by the Law number 3285 (Animal health and Control) are
exempted from the coverage. It is an insurance over the value of the animal.
Technicalities:

Index-based? (computed on meteo data, satellite images, etc….): This insurance is not index based.

Can a farmer insure only part of the animals?               Yes   No

Loss estimation per animal or per farm?: This depends on the type of the contract (individual / herd).

Triggers: which is the minimum loss above which the farmer is compensated?

See Franchise (below).

Method to calculate the reimbursement

The sum insured is the value of the animal subject to insurance. The damage is determined by the
experts of the pool on the sight, and agreed upon by both parties. While estimating the
reimbursement:
- Defective mistake ratio relating to the insured party determined on the expert report is multiplied by
the sum insured, and the result is reduced from the sum insured.
- Value of the usable parts of the animal such as meat, leather, etc is also reduced from the sum
insured.


                                                                                                   726
Compulsory for the farmer?         Yes             No

Is there a bonus-malus system?           Yes            No

Time from the harvest/damage until payment of indemnity (specify if it is maximum or average)

Before the new State Subsidized Agricultural Insurance scheme came in to force, delay in the
payments were varied. There are no official figures on the maximum or average times from
harvest/damage to the payment of indemnities for that period.
According to the General Conditions for the current insurance scheme (came in to force by 1st
.06.2006), for the Livestock Life Insurances, the CLAIM should be made in 24 hours, at latest; and
after the fixing of damages by the expert commissioned by TARSIM and determination of the amount
of indemnity to be paid, the payment to the insured party, again by TARSIM and via bank, is realized
in 30 days, at latest.
Geographic detail used by companies to determine tariffs.

Tariffs (premium rates) for the Government Subsidized Livestock Life Insurances are given in the
following table. As it is observed, the premium rates depend on the number of animals insured and
the type of the insurance, and there is no adjustment regarding the place.
Premium rates in Government Subsidized Livestock Life Insurances
Type of insurance Number of animals Premium* (%)
Individual insurance                     1-4     10,00
                    5-20                 7,50
Herd insurance      21-100               5,00
                    101-200              3,50
                    ≥200                 2,50
* Premiums are estimated gradually within each insurance type. When the animals have various values, and
are more than 4 (or 100) in number, the highest ratio [10% (or 5%)] will be applied to the lowest valued ones.
Franchise (%). Does it coincide with the trigger?
Excess in Livestock Life Insurances

In the Livestock Life Insurances, rates of deductibles and coinsurance are determined according to
the number of animals insured.
Deductibles and Coinsurance in Livestock Life Insurances
 Type of insurance    Number of animals in the policy                          Deductibles (in percentages over
 the sum insured)     Coinsurance
 Individual Insurance 1-4                    -                                 -
                      5-20                   -                                 -
 Herd Insurance*      21-100                 5.0                               20%
                      101-200                3.5
                      ≥201                   2.5
* Deductibles are applied to the whole of the losses occurred over the year.

As a coinsurance, %20 of all the losses in herd insurances is under the responsibility of the insured
party.
Public involvement (subsidies to premiums, re-insurance, regulations)




                                                                                                     727
    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. For the year 2006, the State’s contribution to the premiums paid by
    farmers is fixed at 50%, without differentiating among crops, risks, regions and farm size.
    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.
Coverage in area, number of farms or value (specify and give all values if possible)

Data on the coverage of the Livestock Life Insurances is an available. It is said that only about 0.3%
of the total number of animals is insured. About 24,000 insurance policies are signed in last two
years (2004-2005). Nevertheless, there are no statistics on the number of animals covered in these
policies.
Sources: TSV, TARSİM, TSRSB
4- POULTRY LIFE INSURANCE
Product covered (crop type, livestock, income):

Poultry produced in closed systems, respecting the biosafety and hygiene rules.
Peril/damage covered (or Multi-peril). Is it a insurance on yield? Is there a list of specific perils
covered?:

The coverage (animals covered) shall be determined annually by the Council of the ministers.
  For the year 2006, this insurance provides cover for damages resulting from death or obligatory
  slaughter of poultry animals, because of;
    a) All types of poultry diseases,
    b) All types of accidents and poisonings,
    c) All types of natural disasters,
    d) Fire or explosion
  Contagious diseases obligatory to declare by the Law number 3285 (Animal health and Control)
  are excempted from the coverage. It is an insurance over the value of the animals.
Technicalities:

Index-based? (computed on meteo data, satellite images, etc….): This insurance is not index based.

Can a farmer insure only part of the fields?     Yes        No

There are no specific terms regarding this subject. However, numerious conditions regarding the
safety standards reveal that, the insurance should be contracted over whole of any poultry farm.
Loss estimation per field or per farm?: Losses are estimated on per animal basis.

Triggers: which is the minimum loss above which the farmer is compensated?

See Franchise (below).
Method to calculate the reimbursement: The sum insured is the value of the animals subject to


                                                                                          728
insurance. The damage is determined by the experts of the pool on the sight, and agreed upon by
both parties. While estimating the reimbursement:
- Defective mistake ratio relating to the insured party determined on the expert report is multiplied by
the sum insured, and the result is reduced from the sum insured.
- Value of the usable parts of the animal such as meat, leather, etc is also reduced from the sum
insured.
Compulsory for the farmer?      Yes        No

Is there a bonus-malus system?        Yes           No

Time from the harvest/damage until payment of indemnity (specify if it is maximum or average)

Before the new State Subsidized Agricultural Insurance scheme came in to force, delay in the
payments were varied. There are no official figures on the maximum or average times from
harvest/damage to the payment of indemnities for that period.
According to the General Conditions for the current insurance scheme (came in to force by 1st
.06.2006), for the Poultry Life Insurances, the CLAIM should be made in 24 hours, at latest; and
after the fixing of damages by the expert commissioned by TARSIM and determination of the
amount of indemnity to be paid, the payment to the insured party, again by TARSIM and via bank, is
realized in 30 days, at latest.
Geographic detail used by companies to determine tariffs.

Tariffs (premium rates) for the Government Subsidized Poultry Life Insurances are given in the
following table. As it is observed, the premium rates depend on the number and the category of
animals insured, and there is no adjustment regarding the place.
Premium rates in Government Subsidized Livestock Life Insurances
 Category                             Prim (%)
 Pullets                              1,95
 Laying Hens Chicks                   2,75
 Laying Hens                          3,50
 Breeding Chicks                      2,25
 Breeding Females                     3,25
 Turkeys                              3,50
 Ostrich                              7,50



Franchise (%). Does it coincide with the trigger?
Excess in Poultry Insurances

In the Poultry Insurances, rates of deductibles and coinsurance are determined according to the
types of animals and duration of damage.
Deductibles in Poultry Life Insurances
 Category                         Deductibles (%)        Loss Timing
                                                 Disease     Other (accident, natural disaster etc)




                                                                                                  729
 Pullets                            3.00           1 week    48 hours
 Laying Hens Chicks                 3.00           2 weeks   48 hours
 Laying Hens                        3.00           1 month   48 hours
 Breeding Chicks                    3.00           2 weeks   48 hours
 Breeding Females                   3.00           1 month   48 hours
 Turkey for fattening (Female)      3.00           2 weeks   48 hours
 Turkey for fattening (Male)        3.00           2 weeks   48 hours
 Breeding Turkey                    3.00           2 weeks   48 hours
 Ostrich                            5.00           3 weeks   72 hours

As a coinsurance, %20 of all the losses in poultry insurances is under the responsibility of the
insured party.
Public involvement (subsidies to premiums, re-insurance, regulations)

    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. For the year 2006, the State’s contribution to the premiums paid by
    farmers is fixed at 50%, without differentiating among crops, risks, regions and farm size.
    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.
Coverage in area, number of farms or value (specify and give all values if possible)

Over the recent years, less than 400 poultry farm are covered. Considering that only the number of
chicken farms in the country equals about 10,000 (6785 broiler, 3202 egg production), only less than
4% of the enterprises are insured.
Sources: TSV, TARSİM, TSRSB
                                           ABREVIATIONS

ARIP: Agricultural Reform Implementation Project
ÇATAK: Protection of the Environmental Oriented Agricultural Areas
DFIF: Price Stabilization and Support Fund
MARA: Ministry of Agriculture and Rural Affairs
SPO: State Planning Organization
TARSIM: Pool Operator Company (also called as, Agricultural Insurances Center)
TRK: Turkish Competition
TSRSB: Association of the Insurance and Reinsurance Companies of Turkey
TSV: Agriculture Insurances Fundation
TURKSTAT: Turkish Statistical Institute
TZOB: Turkish Union of the Chambers of Agriculture
YPK: High Plannig Council



                                                                                         730
YTL: New Turkish Lira


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Oskam, A., Alison Burrell, Tugrul Temel, Siemen van Berkum, Natasha Longworth, Irene Molina
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Bora, B., “Public-Private Partnerships for Risk Management in Agriculture: Turkish Experience”, Global
      Conference on Insurance and Reinsurance Pools for Natural Catastrophe Risk, 8-9 December
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Çakmak, E. H., Structural Change and Market Opening in Agriculture: Turkey towards EU Accession,
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    University, Ankara, Turkey, September 2004.
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TCA (Turkish Competition Authority), Annual Report, 2005, Ankara.
TSRSB, Annual Reports, various years.
TSRSB, TSRSB records, various years.
TZOB, Tarımda Gelismeler ve Sorunlar. Ankara: Turkish Union of Chambers of Agriculture, 2004.
Utkueri, O., “Tarım Sigortalarında yeni başlangıçlara doğru ...”, TSRSB Birlik'ten Dergisi, 2005(2).


Exchange rates
Tables on Sectoral growth rates, on inflation rates and on exchange rates can be found in the original
Fact Sheet. In the text, depending on the source of information, some data are given as YTL. From
2005 on, New Turkish Lira (YTL) has replaced the Turkish Lira (TL). The table of exchange rates is
also relevant for conversion between YTL and USD, being:
1YTL = 1,000,000 TL




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