Development of Agricultural Insurance in the Russian Federation

The vast majority of lands in the Russian Federation belong to risky agriculture zones. They are characterized with high extent of risk, low profitability, lower workforce productivity, higher production cost of crop and livestock raising. Agricultural companies bear losses due to crop failure, death of animals and other emergency conditions (the flood, the drought, the fire, storm winds and epidemics). The government supports agricultural manufacturers granting 50% of the insurance premium of mandatory agricultural insurance. However, it is not popular in crop production industry, for instance. For recent 4 years the number of insured companies has been 5 times decreased. The same situation is observed in livestock raising industry. It is mainly caused be bureaucratization of the government support and absence of competition among insurance companies. Furthermore only 1-11% of insurance premium is recovered when insured emergency takes place. It is very low amount. In the Russian Federation policy holders (agricultural companies) do not trust insurance companies. Agricultural companies are forced to practice self-insurance. The study suggests easy and clear method to calculate insurance premium in crop production and livestock raising industries. Calculations are based upon net operating (marginal) income.