Given the high risk of natural disasters in the Philippines, agricultural insurance represents a high-potential growth channel and a vital support system for the sector. For decades, the Department of Agriculture has sought to raise agri-insurance penetration through its state-run scheme. In recent years, though, a rising number of private firms have begun promoting coverage based on weather indices, which should furnish muchneeded insulation from some of the worst natural disasters. According to a 2013 report by the Asia-Pacific Adaptation Network (APAN), losses to major crops due to climate-related events cost the country millions each year. Between 2007 and 2011, typhoons wrought $1.2bn in losses for rice paddy crops alone. More recently, crop losses from Typhoon Haiyan, which struck the Philippines in November 2013, totalled $110m, the UN Food and Agriculture Organisation estimates.

GOVERNMENT SCHEME: The state-owned Philippines Crop Insurance Corporation (PCIC) was set up in 1978 to implement the government’s agricultural insurance programme. Its chief mandate was to insure farmers against losses arising from natural calamities, plant diseases and pest infestations of maize and cash crops. Today, its offerings include palay, maize and high-value commercial crop insurance as well as coverage for livestock, non-crop assets, fisheries and term packages. As of 2012, the PCIC covered 6% of the country’s paddy farmers, with plans to expand this to 9-10% in the coming years and introduce coverage for high-value coconut crops, according to APAN.

NATURAL DISASTERS: One of the PCIC’s most useful schemes is insurance of agricultural assets against natural disasters, offered at prevailing industry rates. Such policies have benefitted farmers hit by recent typhoons. In October 2014, the PCIC awarded P1m ($22,500) in indemnity cheques to farmers in Tuguegarao City whose crops had been damaged by Typhoons Luis and Mario in September 2014. In the aftermath of Typhoon Haiyan, the agriculture registry granted P28m ($630,000) to Cebu Province, whose Governor Hilario Davide III also announced plans to renew P8m ($180,000) worth of agriculture and fisheries premiums in October 2014. Under PCIC policies, payments to Cebu for destroyed rice crops will average around P40,000-50,000 ($ 900-1125). In December 2014, PCIC said it had paid P30m ($675,000) to agricultural claimants in the western Visayas region since January 2014, benefitting 7407 policyholders, mostly rice farmers. With state subsidies and climate change awareness rising, the PCIC expects nationwide enrolment to reach 1m farmers in 2015.

BY THE WEATHER: Conventional crop or livestock insurance relies on direct measurement of damages incurred, yet field assessments are costly and often unfeasible, especially in areas with lots of small-scale farmers. Weather index insurance (WII), by contrast, pays claims based on objective weather data, such as rainfall or temperature. All policyholders in a defined area receive payouts based on the same contract and measurements via the same weather station for an agreed time period. By eliminating the need for in-field assessments, WII has thus become an attractive and viable channel for agri-insurance in the country.

In recent years, it has been catching on. The PCIC partnered with the International Labour Organisation to run a pilot WII project in select communities, completing three test cycles by March 2013, and also partnered with German development firm GIZ to roll out an AreaBased Yield Index Insurance in South Leyte. The private sector has been kicked off programmes such as the Philippines Coop Life Insurance and Mutual Benefit Services, launched in partnership with GIZ and Munich Re with the aim of protecting cooperatives’ loan portfolios against weather-related losses of palay and maize crops. In January 2014, the UN Office for Disaster Risk Reduction announced plans to roll out a WII scheme in partnership with private multinationals. Perhaps most promising, in September 2014 PGA Somo Insurance Company said it would launch the country’s first-ever WII policy for farmers on Mindanao Island, setting the stage for more commercial activity in the segment.