The House of Representatives has approved on third and final reading a measure strengthening the Philippine Crop Insurance Corp. (PCIC) by expanding its coverage and allowing it to engage in index-based insurance and reinsurance.
Voting 197-0, the lower chamber passed late Monday House Bill (HB) 6923, or “An Act Strengthening the PCIC,” repealing Presidential Decree 1467, which created the government-owned and -controlled corporation attached to the Department of Agriculture.
In a news briefing, Rep. Arthur C. Yap of the Third District of Bohol, the chairman of the House Committee on Economic Affairs and principal author of the bill, said the measure seeks to overhaul the crop-insurance system by allowing it to provide index-based direct insurance and reinsurance policies.
“With no real and expansive agricultural, property or life-insurance protection, farmers just watch helplessly, as the weather comes to take away the sweat and tears of investments that farmers have planted,” Yap said.
According to Yap, the measure mandates the PCIC and encourages private insurance companies to offer index-based insurance as one of their products. Index-based insurance is an “innovative and technically sound” approach to manage risks, especially for highly vulnerable farmers in rural areas, he said.
“Unlike traditional crop insurance in which indemnity payments are linked to individual farmer yields and losses, index insurance links payments to independently established data, such as local rainfall, wind speed, temperature, typhoons, cyclones and historical yield data as trigger events to release payments and compensation to affected farmers and fishermen,” he added.
Yap noted that the ability to pay out cash early, at different stages of an unfolding calamity, without having to wait for a total wipeout, will allow farmers to prevent more losses.
In Africa he said payouts prevent farmers from selling their livestock and moving to cities.
“By purchasing risk-insurance, nations can now shift disaster risk and associated economic, social and medical costs away from local government units and governments to the global capital market. The government can instead focus on disaster preparedness and a system for saving lives and distributing aid and payouts in times of calamities and disasters,” Yap said.
HB 6923 seeks to expand the types of crops that can be insured by the PCIC, and to include life and accident insurance for farmers and fishermen and their dependents.
It also aims to strengthen the financial and organizational capacity of the PCIC while encouraging private insurance companies to offer crop insurance.
Aside from rice, HB 6923 indicated that corn, high value commercial crops, livestock, aquaculture and fishery, agroforestry and forest plantations would also be covered by crop insurance.
The measure requires farmers seeking production loans for rice and other crops essential to food security to insure their crops with the PCIC.
The bill also authorizes the PCIC to extend life- and accident-insurance coverage to
farmers and fishermen.
It mandates the PCIC to insure properties and facilities of the government used in agri-fishery projects, including reinsurance coverage to agri-fishery-forestry properties underwritten by private and government insurance companies.
Under the bill, the PCIC shall offer weather index-based insurance, specifically for excessive or insufficient rainfall. The bill also authorizes the PCIC to offer crop reinsurance to encourage private commercial banks to sell crop insurance.
HB increased the authorized capital stock of PCIC from P2 billion to P10 billion, as well as the penalties slapped on individuals who would make spurious crop insurance claims.
Yap asked the Senate to immediately file a counterpart bill to HB 6923 to allow the PCIC to engage in index-based reinsurance and insurance and to be recapitalized and supported for it.
“This move will clearly signal to the private sector and capital markets that the Philippines is serious about this program to help our farmers, and secure food production in our country,” he said.