Article | 20 May 2022 Read time: 6 mins
With the intensification of climate change, Filipino farmers, comprising a quarter of the nation’s labor force, are obtaining larger shares. The country endures an average of 20 typhoons annually, and agriculture in the Philippines.is a perilous venture.
Labao Grace Melinda is well aware of all this. She personally witnessed the hardships caused by typhoons, which affected her family’s 1-hectare rice farm in Bulacan province, located north of Metro Manila. Her father, who is now 77 years old, has been managing the farm for more than 40 years.
Ms. Labao, who is the Officer-in-Charge for Microinsurance at the private insurer CARD Pioneer Microinsurance Inc., Expressed that when farms are struck by a typhoon, farmers are brought back to a starting point of zero. Additionally, she mentioned that financially, they face complete devastation as they are unable to regain the money they invested in their crops.
The crop insurance industry in the country is attempting to bring about a revolutionary change by signing the first-ever public-private partnership agreement. Pioneer CARD and PCIC, the state-owned Philippine Crop Insurance Corporation, signed this agreement on February 3 with the support of the Asian Development Bank. Insurers and the government are collaborating to launch this initiative.
Until now, there has only been restricted agricultural insurance coverage available for a specific section of the market, which primarily focuses on farmers cultivating high-value crops like bananas. Photo: ADB.
Private sector participation critical
The primary role of PCIC is to cover losses caused by pests, plant diseases, and natural calamities for small-scale farmers, mainly in commercial farms. As the leading agricultural insurer in the country, PCIC offers subsidized coverage to ensure the protection of farmers.
PCIC President Jovy Bernabe emphasized the importance of the private insurance industry’s involvement, stating that there is an evident demand and a significant market for it. He further highlighted the increasing significance of this participation, particularly due to the fact that climate change has further intensified the risks faced by farm producers.
In 2018, conversations commenced regarding the augmentation of agricultural insurance between ADB, the Department of Finance (DOF), the Insurance Commission, and private insurers. The technical working group formed included representatives from government entities, development partners like the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), and the Philippine Insurers and Reinsurers Association.
Kelly Hattel, a Senior Financial Sector Specialist for Southeast Asia at ADB, expressed that the farmers’ financial resilience will grow, consequently providing them with a wider range of choices in the crop insurance market through increased private sector participation.
In the Philippines, there is a significant demand for crop insurance, particularly for high-value crops like coconuts. Photo: ADB.
Insuring high-value crops
During the signing event, Insurance Commissioner Dennis Funa stated, “Insurance has the ability to mitigate the risks faced by farmers, enabling them to experiment with novel technologies in order to enhance and enhance the productivity of their farms.” He emphasized that agricultural insurance gives our farmers and farm managers the confidence to embrace emerging technologies and advancements in the industry.
Each insurance policy will be released as part of a pilot test, with the risk of each policy being shared at a 70:30 ratio by CARD Pioneer and PCIC under the co-insurance agreement. Up until now, PCIC has had restricted coverage in the specific market sector that focuses on farmers who cultivate high-value crops such as coconut, coffee, cacao, banana, sugarcane, and pineapple.
According to the National government, the Council for Disaster Risk Reduction and Management, more than 178,000 fishermen and farmers were affected in the regions of the central Philippines.that were devastated by Typhoon Odette, a category 5 typhoon that hit in December 2021. Agricultural losses from the typhoon were estimated at Php4.2 billion (around $82 million). These natural calamities and crop damages caused by typhoons can result in the destruction of farmers’ livelihoods, as well as drive up food prices and disrupt food supply in the country.
Crop insurance aims to provide relief to farmers during dry seasons and typhoons, especially when crops in rainfed areas, such as those affected by the El Niño drought phenomenon, become too wilted to be harvested. According to PCIC, only about one-third, or an estimated 10.9 million, of farm owners are covered by crop insurance.
Expanding crop insurance coverage
The CARD Pioneer introduced its Binhi (Seed) Crop Insurance Program in 2016, providing insurance protection for rice and corn against typhoons, floods, and monsoon rains. As part of the agreement, CARD Pioneer is also extending its activities to include high-value crops.
Ms. Labao mentioned that agricultural loans could be supplemented with crop insurance. Pioneer CARD plans to tap into its existing partnerships with farm input sellers, non-government organizations, cooperatives, and rural banks to expand the offering of crop insurance in areas not yet reached by PCIC, thereby increasing the value of crop insurance in the country.
Mr. Bernabe stated, “There is a significant amount of livestock available for the market, including swine and poultry. They may even consider expanding their portfolio to include other commodities such as corn and rice. They can acquire technology from us and learn from us through the Pioneer CARD program, if the pilot testing proves to be successful.”
The ADB is currently supporting the Inclusive Finance Development Program, which aims to increase financial inclusion in the country over the long term. Since 2016, the government has been implementing reforms to support this program, with the ADB providing loans worth $600 million and technical assistance in the form of a grant to assist the crop insurance industry.
From 2008 onwards, ADB has been supporting the government in the growth of its microinsurance sector. Private insurance companies provide coverage for crop-related risks, with the Insurance Commission working towards enhancing their oversight. Within the framework of agricultural insurance regulations released by the commission in November 2021, the collaboration between PCIC and CARD Pioneer is encompassed. This partnership facilitates the execution of the government’s National Strategy for Financial Inclusion.