Crop insurance market development in a transition economy: The case of Kazakhstan

We analyze the current state and future requirements of an agricultural income stabilization mechanism in a transition country – namely, the crop insurance system in Kazakhstan. Three objectives will be pursued: First, factors influencing the development of the crop insurance market will be identified. Second, insurance’s capabilities to efficiently stabilize income under transition circumstances will be evaluated. Finally, recommendations for developing crop insurance as an effective income stabilization tool will be provided.Results indicate that the prevailing institutional framework for establishing a sustainable crop insurance system is rather weak, and available insurance products are not preventing the problem of asymmetric information to a satisfying degree. Examination of potential insurance products suggests that area-yield and weather-index insurance is most appropriate under transition conditions. This evaluation is supported by the results of a mathematical programming model, which tests the utility-efficiency of various risk-management instruments.