Agriculture and Fisheries Insurance in the Philippines: Opportunity or Trap? Jimmy Loro Senior Advisor GIZ Regulatory Framework Promotion of Pro-Poor Insurance Markets in Asia II Regulatory Framework Promotion of Pro-poor Insurance Markets in Asia (RFPI Asia) www.inclusiveinsuranceasia.com

Possible effects of Climate Change Contents Sector Overview Possible effects of Climate Change GoP, GIZ and Private Sector Response Assessment Recommendations Regulatory Framework Promotion of Pro-poor Insurance Markets in Asia (RFPI Asia) www.inclusiveinsuranceasia.com

Sector Overview …Designing a truly relevant community for the target market…

56 Million (54%) live in Rural Areas in 2016 32% of land area (9.671 million of 30 million hectares) for agriculture 14.478% of agro lands 1.4 million hectares, for rice 10.033 million Agriculture workers, 23% of labor force (2017) …Designing a truly relevant community for the target market…

…Designing a truly relevant community for the target market… Agriculture accelerated by .6% more from 4.3% in 2016 to 4.9% in 2017 19.6% is fisheries sector Industry decelerated from 9.3% to 6.1% Services sector main growth driver at 6.8% in 2017 …Designing a truly relevant community for the target market…

…Designing a truly relevant community for the target market…

Possible Effects of Climate Change …Designing a truly relevant community for the target market…

…Designing a truly relevant community for the target market… Source: Srinivasan, A., “Climate Change and Food Security in South east Asia: Issues and Policy Options”, ADB.

…Designing a truly relevant community for the target market… Source: www.farmingfirst.org …Designing a truly relevant community for the target market…

Projected Changes in Global Fisheries Catch, 2005-2055 …Designing a truly relevant community for the target market… Source: The Sea Around Us Project, University of British Columbia, Canada

GoP, GIZ and Private Sector Response …Designing a truly relevant community for the target market…

GIZ Support to the Climate Change Commission in the Philippines …Designing a truly relevant community for the target market…

GIZ Remote Sensing Based Information and Insurance for Crops in Emerging Economies Project (RIICE) …Designing a truly relevant community for the target market…

GIZ Better Rice Initiative in Asia (BRIA) …Designing a truly relevant community for the target market…

GIZ Joint Protection of the Sulu-Sulawesi Marine Ecoregion …Designing a truly relevant community for the target market…

PCIC Financial Performance: 2014; 2015 …Designing a truly relevant community for the target market…

PCIC Financial Performance: 2013; 2014 …Designing a truly relevant community for the target market…

PCIC Financial Performance: 2012; 2013 …Designing a truly relevant community for the target market…

…Designing a truly relevant community for the target market…

CARD Pioneer NatCat Insurance, 2008-2016 …Designing a truly relevant community for the target market…

Assessment …Designing a truly relevant community for the target market…

Typhoon Haiyan: …Designing a truly relevant community for the target market…

Typhoon Glenda: …Designing a truly relevant community for the target market…

Typhoon Ruby: …Designing a truly relevant community for the target market…

Typhoon Nina: …Designing a truly relevant community for the target market…

…Designing a truly relevant community for the target market…

…Designing a truly relevant community for the target market…

Assessment: Universal and Thrift banks provision of agri finance in 2016: 12.96% for agriculture out of 15% and .74% out of 10% for agrarian reform, half of portfolio channeled to alternative vehicles like bonds P435.8 billion1 (49.41%) Agri-Agra credit provided out of P882 billion available Agri- Agra credit in 2016 Management of credit portfolio considered high risk, with no effective risk management option? 1: http://business.inquirer.net/222430/bank-lending-agri-agra-sectors-rose-sept-2016 …Designing a truly relevant community for the target market…

Assessment: Direct compliance of banks to Agri-Agra credit: P218.3 billion1, 24.75% of the P882 billion available Agri-Agra available credit in 2016. PCIC capitalization is P2 billion2, which is 60% premium subsidy for rice (can insure 10x) could insure 71% of P58.88 billion rice farm loans, if 80% of 1.4 mio hectare rice farms avail of P42,061.003 production loan per hectare 1: http://business.inquirer.net/222430/bank-lending-agri-agra-sectors-rose-sept-2016 …Designing a truly relevant community for the target market… 2: http://pcic.gov.ph/news/pcic-in-the-news/weather-based-crop-insurance-products-making-farmers-more-climate-change-resilient/ 3: https://psa.gov.ph/sites/default/files/crs_palay2013.pdf

Assessment: Total agriculture insurance coverage of the P218.3 billion1 (24.75% of total available credit) exposure in 2016 is unknown, but likely less than 5%. Loan Guarantee availed by Banks with AGFP: P18.2 billion (31 Mar 2016), 08.34% of exposed loan portfolio 1: http://business.inquirer.net/222430/bank-lending-agri-agra-sectors-rose-sept-2016 …Designing a truly relevant community for the target market…

Recommendations …Designing a truly relevant community for the target market…

Recommendations Operations National Mapping on location of agri-agra areas and degree of exposure to NatCats to determine areas for credit selection and expansion Fast-track approval of bills supporting movable collaterals to facilitate more agri-agra loans

Recommendations Operations Use GIZ “Bridging the Protection Gap on natural Catastrophe Insurance for MSMEs in Agriculture and Other Sectors” Manual (Disaster Risk Insurance Manual / DRIM) Thru GIZ Developing Public-Private Partnership (DPPP): Creation of a National Pool of Distribution Channels for Agri-Agra Insurance Diversify risks

Operations: Thru GIZ Developing Public-Private Partnership (DPPP) Recommendations Operations: Thru GIZ Developing Public-Private Partnership (DPPP) Development and commercialization of open index-based agriculture insurance targeting agri-agra activities --- non-crop specific Weather-triggered Insurance of agri-agra loans, input costs, and related Insurance of agro-fisheries assets in value chains

Recommendations Policy Simplify and reduce documentary burden on agri-agra and fisheries credit and insurance, to expand market and manage risks Widen and strengthen Bancassurance channel for agri-agra credit

Recommendations Policy: Thru GIZ Developing Public-Private Partnership (DPPP) Full development of agri-agra insurance sector Creation of a Private Sector Agriculture Insurance Pool

Recommendations Policy: Thru GIZ Developing Public-Private Partnership (DPPP): On Rice Insurance Create a Public-Private Agri-Agra Insurance Scheme Create a data sharing protocol for the private sector to access DA PRISM municipal rice yield data in all municipalities to offer area-based yield index insurance, nationwide

Recommendations Policy: Thru GIZ Developing Public-Private Partnership (DPPP) Use risk layering to involve private insurance companies and increase capacity to manage agri-agra risks Create IRR on utilization of public funds on disaster response for agriculture and agrarian reform communities, based on risk layering

Recommendations Risk Layering Source: Mechler, R., et. al.. “Managing Unnatural Disaster Risk from Climate Extremes”

Recommendations Possible Philippines Agri-Agra Risk Layering Model Category Trigger, Coverage Response Very High Impact, Low Frequency Typhoon Signal 3 – 5 31 mm/hr and more sustained Municipal rainfall in the next __ hours Retain Risk + Adaptation + Agro Insurance + Government Risk Finance Farmers Private Insurers (agro insurance pool) PCIC (agro insurance pool) Government Risk Finance High impact, Low frequency Typhoon Signal 2 15-30mm/hr sustained Municipal rainfall in the next __ hours Retain Risk + Adaptation + Agro Insurance Low Impact, High Frequency Typhoon Signal 1 7.5-15 mm/hour sustained Municipal rainfall in the next __ hours Retain Risk + Adaptation Impact Frequency

Thank you www.inclusiveinsuranceasia.com www.developpp.de jimmy.loro@giz.de Regulatory Framework Promotion of Pro-poor Insurance Markets in Asia (RFPI Asia) www.inclusiveinsuranceasia.com