This summers extreme heatwave in Russia which resulted in widespread fires and a serious drought across much of the country has caused considerable losses for individuals and the public/private sectors. Drought destroyed 17% of the available crop area in Russia and the fires spread over 200,000 hectares causing widespread damage and loss of homes and businesses.
Standard & Poor’s has published an article which suggests that the severity of these weather related disasters experienced this year in Russia could spark increased interest in insurance and risk transfer methods. S&P says that disasters on this scale in an economy with a devloped insurance sector would have resulted in an undermining of the insurers financial stability. However, in Russia where insurance penetration is still low it’s not believed that there will be any long lasting effect to the sector, except perhaps a renewed interest in insurance particularly in agricultural and fire insurance says S&P.
It’s inevitable that agricultural insurance will become more popular after such a devastating year. Russian farmers would benefit greatly from an approach to insurance which links payouts with climate variables and in some poorer regions microinsurance products may be suitable. An opportunity exists for insurers willing to market themselves to the Russian agricultural community.
You can read the report from S&P if you are a Ratings Direct subscriber here.