Non-life insurance companies shall be allowed to provide agriculture insurance. independently or in collaboration with the Philippine Crop lnsurance Corporation (PCIC), the government agency mandated by law to provide crop insurance to small farmers, says the Insurance Commission (IC) in a circular to general insurers and insurance intermediaries which takes effect immediately.
General insurers can also collaborate on agriculture insurance with domestic and international public and private-sector insurers, reinsurers, technology providers and multilateral agencies.
At present, agriculture insurance in the country is mostly provided by the PCIC which provides multi-peril crop insurance, which covers losses due to weather, natural calamities, pests and diseases, for various types of agricultural commodities (e.g. rice, corn, high-value commercial crops, livestock and fishery).
The circular notes that the insurance penetration rate among farmers is low, ranging at only 8-14% for rice and only 2-6% for corn for the years from 2013 to 2017.
Explaining its decision to open up agriculture insurance, the IC says that the development and availability of new technology platforms enable private insurers to more accurately determine the risks associated with agriculture and improve cost efficiency in the delivery of agriculture insurance to farmers located in remote areas. At the same time, the PCIC is willing to share relevant data and information, as well as to provide and share capacity with private insurance companies that would like to provide agriculture insurance,
The IC says that private insurance companies recognise and consider the agriculture sector as a new and potential market. Their increased capitalisation enables them to cover catastrophic risks that are usually present in agriculture production and related activities.
Non-life insurance companies can apply to participate in a regulatory sandbox to pilot their agriculture insurance offerings. The regulatory sandbox will run for five years to assess how the entry of the private sector in agricultural insurance will affect the sector’s performance and stakeholders. The sandbox is renewable at the option of the lC.
Government subsidies received by the PCIC amounted to PHP28.6bn ($564m) in the past two decades, according to Finance Secretary Carlos Dominguez. As the new PCIC board chairman, Dominguez wants the PCIC to work with the private sector in insuring the crops of farmers, as he intends to reduce the agency’s reliance on state subsidies.
Definition of agriculture insurance
The circular says that "agriculture insurance" shall refer to the insurance of the produce of or assets used in cultivation of crops (i.e. grains, cereals and other crops as well as fruits and vegetables), livestock (i.e. dairy, cattle, hog and beef), rearing, animal husbandry, poultry farming, dairy farming and fisheries including all value chain activities like production, transportation. storage processing, packaging, preservation and marketing. Any insurance product already classified under existing categories of insurance, eg. flre, marine. engineering, shall be excluded from the definition.