Agricultural Catastrophic Insurance g p for Poor Farmers in Perú

Agricultural Catastrophic Insurance g p for Poor Farmers in Perú

Agricultural
g
Catastrophic
p
Insurance
for Poor Farmers in Perú
Lourdes del Carpio
p – Manager,
g , Agricultural
g
Insurance
Rio de Janeiro, November 2011
La Positiva Seguros
g
¿Who we are?
La Positiva Seguros is an
insurance company with
more than 73 years of
experience in the insurance
market with more than
3’000,000 insured clients in
Perú.
La Positiva Seguros
Innovating
La Positiva Seguros :
 Leads in Agricultural Insurance.
Insurance
 Developed the fisrt area based yield insurance for cotton.
 Pioneer selling life microinsurance to farmers in Perú.
 Developed the first index insurance based on sea surface
temperature ( Index Insurance against El Niño).
 Insures crops
p of more than 219,000 p
poor farmers.
International Presence
In Latin America
• Perú
La Positiva Seguros y Reaseguros
La Positiva Vida
• Bolivia
Alianza Seguros Generales
Alianza Vida
• Panamá:
Interoceánica de Seguros S.A.
•Nicaragua
Compañía de Seguros América
National Presence
In Perú 23 Offices
• Arequipa
• Cajamarca
• Chiclayo
Chi l
• Chimbote
• Cusco
• Lima
‐San Isidro
‐Lince
‐‐ Miraflores
‐‐ Los Olivos
‐‐ San Juan de Lurigancho
‐‐ Callao
• Trujillo
• Huancayo
• Ica
• Iquitos
I i
• Ilo
• Juliaca
• Piura
• Pucallpa
• Tacna
Insurance Market Share
INTERSEGUR OTROS
O
4,0%
6,7%
INVITA
7,6%
RIMAC
33,9%
MAPFRE
10,7%
LA POSITIVA
12 1%
12,1%
PACÍFICO
25,0%
La Positiva Seguros is third in the Peruvian Insurance
Market
Fuente: SBS a Julio 2011
Agricultural
g cu tu a Secto
Sector
New Market
GDP: 8% %
Rural Poverty: 60,3 %
Urban Poverty: 21,1%
Agricultural Sector
New Market
Market– New Insurance Products
Agroexportation
90,000 Has.
Extensive Agriculture
1. 7 Millones Has.
Internal commerce
Subsistence Agriculture
g
2 Millones de Has.
Minifundio
Self-consumption
• Commercial Agricultural Insurance
• Index Insurance against El Niño
 No subsidy
 Sales channel: Direct,
Direct banks,
banks farmer
farmer´s
s
orgranization.
• Commercial Agricultural Insurance
• Index Insurance against El Niño
ñ
 No subsidy
 Sales channel: Banks,
Microfinance institutions, farmer´s
organization´s
´
• Catastrhophic Agricultural Insurance
 100% government subsidy
 Net p
premiums:
2009 USD 6.1 Millones
2010 USD 6.9 Millones
Sales Channel: Direct to Regional
Governments
Insurance for the poor needs
public – private partnership
Challenges to sell agricultural insurance
to small farmers.
Demand Side
1 Smallholders
1.
Between 3-10 Ha
Less than 3 Ha
Between 10-50 Ha
More than 50 Ha
2. No insurance culture in rural areas.
 High costs to implement an educational campaign.
 Public and private sector could invest on insurance education.
Farmers´educational level: 2009
/ No education
/ Incomplete Primary
/ Completed Primary
/ Completed Secondary
/ Superior
Supply Side
1 High
1.
Hi h transaction
t
ti costs–
t high
hi h insurance
i
premium
i
rates
t .
- Government needs to improve the information quality
(yields cost of production
(yields, cost
of production and crop
and crop losses due to climate).
climate)
‐ Government could subsidize in part or all the premium cost.
‐ Private sector could
ld research
h mechanisms
h
to reduce cost
d
(f
(for
example can save on loss ajustment with weather index based
insurance). )
2.
Limited insurance distribution channels for selling agricultural
insurance.
- Insurance companies could agree with governement to use some organizations or public programs as distribution channels.
Public Sector in Latin America (LA)
Susbsidizes Agricultural
g
Insurance
Evolución del Financiamiento del Seguro Agropecuario (millones de US$)
800
36%
40%
Sector Privado
700
35%
Sector Publico
600
26%
30%
25%
Sector Publico/Primas
500
25%
20%
18%
400
300
20%
14%
15%
200
10%
100
5%
0
2004
2005
2006
2007
2008
0%
2009
Public Sector Subsidy
Sector Subsidy in LA =US$ 260MM.
in LA =US$ 260MM
Brasil y México concentrates 90% of public sector subsidies in LA.
Source:Ramiro Iturrioz,, Senior Agriculture Insurance Specialist – The World Bank
13
Subsidies in Spain
E l ti off subsidies
Evolution
b idi an insured
i
d sums
Subsidies
Insured Sum
Subsidies
Years
Millions of Euros
Source: www.agroseguro.es
Insured Sum
Subsidy in México
Assigned and Implemented Budget
Implemented Resources 2003-2010 (Million of Dollars)
FederalDirect support Direct Total support Federal
Total
Insurance Insurance
The poor are always the most affected
by natural disasters,
disasters sometimes
becoming poorer.
Rural population is more affected by natural disasters than urban population
Graphic N°17: Population perceives that was affected by natural disasters during the period 2004-2008
Rural
Urban
The poor affected more by
more by disasters between 2004‐2001
2004 2001
Extremely poor
Poor
Not poor
How people respond to natural disasters impact
Sold their belongings
g g
Received aid from government
Obtained loans
Spent their savings or capital
Found another job
Diminished consumption
Didn´t do anything
Disasters economic impact from the households perspective
Income diminishes
Loss of belongings
g g
Income diminishes and loss of belongings
None
Economic losses due to El Niño by sectors
Loss
7 % of GDP
Loss
5 % of GDP
1997-1998
1982-1983
532
218
485
1389
1626
2533
S i l sector
Social
t
P d ti Sector
Productive
S t
I f t t
Infrastructure
S i l sector
Social
t
P d ti Sector
Productive
S t
I f t t
Infrastructure
Sectores sociales
Infraestructura
Sectores sociales
Sectores productivos
Infraestructura
Sectores productivos
Fuente: Estimaciones de la CAF, sobre la base de la cifras de CEPAL
Fuente: Programa Desarrollo Rural Sostenible - PDRS
Rain registered in Juli District –Puno
Region (litro/m2)- Period january-march
900
800
700
Rain
accumulated in
the
period
january
–
march 2011 is
the
highest
level in the last
10 years.
600
500
400
300
200
100
0
Agriculture calendar years
calendar years
Region of Puno 2010 and 2011
Damaged
g
Crops
p
Hale Flood
Flood
When there is a natural disaster
Government´s aid to poor usually
reaches them late or the poor
doesn´t get the aid
Government Aid for Natural Disasters (2004
(2004-2008)
2008)
Variable
Received Government Aid
Extremely poor
(%)
4.07
Poor
3.12
Not Poor
3.89
 The not poor received more government aid than the poor.
Pending reconstruction of cities after earthquatke
The 2007 Peru earthquake was an earthquake measuring 8.0 richter
q
g
scale that hit the central coast of Perú on Wednesday, August 15, 2007.
519 people dead; 1,366 wounded; 58,581 houses destroyed; 13,585 houses affected; 103 hospitals affected; 14 hospitals destroyed.
 Cities affected have been reconstructed yet.
 The Comptroller General's Office detected the public entities involved in the reconstruction have
public entities involved in the reconstruction have comitted several irregularities (crimes of misappropriation, embezzlement, incompatible negotiation).
Catastrophic Agricultural Insurance
¿What is the agricultural catastrophic
insurance?
 Protects crops in areas cultivated by poor
farmers.
 The guaranteed yield is 40% of the
average yield in the insured area.
Catastrophic Agricultural Insurance
Institutional Framework
Government:
 Pays 100% of the premium.
p y del
 There is a subsidyy fund “Fondo de Garantía del Campo
Seguro Agropecuario”.
The Fund
Th
F d Council
C
il
 Members: Representatives from Ministry of Economy,
Agriculture and from the Ministries Council.
 Define, insured areas, premium rates, risks covered.
Catastrophic Agricultural Insurance
Regional Governments
 Decides what crops to insure and is the policy holder.
La Positiva Seguros
 Retains part of the risk and the other part is transferred to
a reinsurer.
 Pays indemnization if crops are loss due to a catastrophic
weather event.
Catastrophic Agricultural Insurance
Characteristics:
 Massive: Insures all the farmers on the areas selected y the
Ministry of Agriculture.
 Catastrophic: Indemnization occurs when the crop yield is in
the
h area insured
i
d is
i below
b l 40% off the
h average historic
hi
i yield.
i ld
Catastrophic Agricultural Insurance
 Covered risks: Drought, low temperature, hail, high
temperatures, humidity excess, flooding, freezing, strong
winds plagues,
winds,
plagues diseases.
diseases

Sum insured: Between 100 y 200 dollars per hectare.
Catastrophic Agricultural Insurance
 Loss Adjustment
• 11points randomly
selected to do loss
do loss
adjustment.
• Loss adjusment is
not done parcel by
parcel.
If the average of loss
i the
in
h 11 points
i
i
is
below the 60% of the
average historic yield
in the area insured,
La Positiva will need
to insure to all the
farmers that have
crops in the area
i
insured.
d
Catastrophic Agricultural Insurance
Siniestrality
Premiums/Indemnizations 2010‐2011
REGIÒN
PRIMAS NETAS SUMA ASEGURADA INDEMNIZACIONES ($)
($)
($)
4,114,182.01
INDICE DE
SINIESTRALIDAD
AYACUCHO
1,932,621.34
13,804,438.13
213%
CAJAMARCA
1,393,399.25
9,952,851.80
HUANUCO
1 418 483 55
1,418,483.55
10 024 618 71
10,024,618.71
201 615 11
201,615.11
14%
PASCO
394,647.33
2,798,917.27
215,559.71
55%
PUNO
1,807,302.45
12,772,245.32
2,134,964.03
118%
Total
6,946,453.92
49,353,071.22
6,666,320.86
96%
0%
Catastrophic Agricultural Insurance
Indemnizations 2010‐2011
REGIÓN
INDEMNIZACIONES CAMPAÑA 2009‐2010
INDEMNIZACIONES CAMPAÑA 2010‐2011
AYACUCHO
1,025,629.50
4,114,182.01
CAJAMARCA
0.00
0.00
HUÁNUCO
587,338.13
201,615.11
PASCO
0.00
215,559.71
PUNO
820,943.40
2,134,964.03
TOTAL ($)
2,433,911.02
6,666,320.86
Catastrophic Agricultural Insurance
Poor Farmers that Received Indemnization
Región 2009‐2010 2010‐2011
Puno 9,376 29,600
Ayacucho 7,200 30,300
Huánuco
Huánuco 7 974
7,974 1 200
1,200
Pasco ‐ 3,900
Total 24,550 61,100
Conclusions
1. Agricultural insurance for the poor is only possible is the
Government subsidizes part or all the premium.
premium
3. Insurance companies need to do research to find the best
agricultural insurance schemes that will lower transaction costs and
the premium rate.
4. Private p
public p
partnership
p facilitates the p
poor to have access to
agricultural insurance.
5. Inurance han help poor farmers not to become poorer.