Agrarian Fund secretly chose new insurance partners

Photo: Reuters

This fall only two little-known players on the market of agricultural insurance – Zdorovo and Finist – gained access to the insurance of forward purchases of the 2015 grain harvest, which the Agrarian Fund of Ukraine started on September 1, CEO of the Agricultural Insurance Pool Vitaliy Samarskiy told Capital. “Today, Zdorovo and Finist insurance companies engage in forward purchases of the 2015 grain harvest,” he said. “The principle of selection of market players for insurance of forward contracts is unknown”. Capital has not received comments from either the Zdorovo insurance company, or the Agrarian Fund, or the Ministry of Agrarian Policy and Food as the publication went to print last night. On the phone representatives of Finist, located in Cherkasy, said that the insurer moved to Kyiv and refused to give any new contacts details of the company.

Changing of the guard

“The reasons for which the Agrarian Fund chose these insurers are not entirely clear. I can only say that the situation is far from civilized solutions and mechanisms,” said Director of Dominanta Oleksiy Rumyantsev. These reasons, however, were difficult to understand even in the past.

For example, in 2012 – 2013 all forward transactions passing through the Agrarian Fund were insured exclusively by the Agricultural Insurance Pool, which includes only four insurers: Ukrainian Agricultural Insurance Company, Strakhovi Harantiyi, Dominanta and Brokbiznes. These companies were considered to be associated with the former government. “Therefore, agricultural risks related to the budget funds were usually insured by them,” says President of the League of Insurance Organizations of Ukraine (LIOU) Oleksandr Zalyotov.

Lack of transparency in activities of the pool was the reason for termination of cooperation with it for the State Food Grain Corporation of Ukraine in 2013. Instead the corporation chose the leaders of the agricultural insurance market: Aska, INGO Ukraine and PZU for protection of its forward transactions. This is rational, given that losses from such risks can be complex and large. “Therefore, the company should have experience, subject matter experts and contracts with reputable international reinsurers,” says CEO at Aska Andriy Shukatko. Only few professional market players can boast of such a package.

The Agrarian Fund refused to cooperate with the pool after the change of government in 2014. This could be understood, if it was not for its choice of partners. Both companies – Zdorovo and Finist – are small, little-known players on the agricultural insurance market. In 2013 the assets of Zdorovo accounted for UAH 40.3 mn, the assets of Finist – UAH 22.1 mn, according to the Agency for Development of Stock Market Infrastructure. For example, last year the assets of INGO Ukraine reached UAH 953 mn, the assets of Aska – UAH 854 mn. “We do not know whether these two are involved in insurance against agrarian risks in principle. It is also unclear whether they are reinsured by an international reinsurer or whether they have such,” said Samarskiy.

No strangers

The record could be put straight by the information about the owners of these insurance companies. But unlike in the case with banks such information about insurers is not published. The major shareholders of Zdorovo are the Commercial Standards NGO (47.15%) and Kompanіya Contact LLC (36.34%), according to the Agency for Development of the Stock Market Infrastructure. And the owner of Finist is a citizen of Ukraine (84.29%). In 2013 Capital learned that Radical Bank became the owners of Zdorovo, but the company itself did not confirm such information.

Insurers believe that both structures have roots in the east. “The roots are of no importance. It is important that once again, as before, the government agency chooses partners without any open tenders or clear conditions. This is a flagrant violation of the antimonopoly legislation,” said Zalyotov. In this regard the LIOU is already preparing an appeal to the Prosecutor General’s Office, the Antimonopoly Committee and the Agrarian Fund.