IFC backs new insurance for typhoon-hit farmers

MANILA, Philippines - The International Finance Corp. or IFC, a member of the World Bank Group, will work with the Center for Agriculture and Rural Development (CARD) Insurance Agency and  Pioneer Insurance and Surety Corp. to design new insurance products that aim to protect Filipino farmers against typhoon-related losses, which are estimated to have exceeded $2.5 billion since 2009.

According to the 2012 World Disaster Report, the Philippines ranks as the third most disaster-prone country in the world, with an average of 20 typhoons per year.

The project will enable CARD Insurance and Pioneer Insurance to offer indemnity insurance to thousands of farmers and rural entrepreneurs as an affordable means to protect their assets and livelihoods.

“This is but a first step toward helping our farmers in the very challenging but necessary management of the risks they face,” said president and chief executive officer Lorenzo Chan Jr. of Pioneer Life Insurance who represents Pioneer Insurance in the project.

The indemnity insurance will be complemented by index-based insurance, which pays out benefits by using a pre-determined index taking into account factors such as wind speed and rainfall levels to estimate losses resulting from bad weather and catastrophes. This approach eliminates the need for traditional insurance claim assessments, enabling farmers to get their compensations more quickly.  

With these insurance products offered by CARD Insurance Agency to members of CARD, the country’s biggest microfinance institution aims to expand their agricultural lending while helping farmers protect their assets.

“This new partnership will help our farmer clients mitigate risks, and they make up nearly half of our 1.8 million clients,” said CARD chairman Jaime Aristotle Alip.

The Global Index Insurance Facility, a multi-donor trust fund managed by IFC, will provide funding and technical advice for the project. The facility is funded by the European Union, Japan, and the Netherlands and its implementing partners have insured more than 228,000 farmers and micro-entrepreneurs in developing countries.

“Farm insurance has not taken off in the Philippines because premium costs are high and payment delays discourage potential clients,” said IFC resident representative Jesse Ang, adding  “But the lack of insurance makes farmers vulnerable to losses from calamities. We hope that our latest initiative will help address this problem.”

Agribusiness contributes about 11 percent to the gross domestic product of the Philippines and provides more than a third of the total number of jobs in the country. But insufficient risk management is a major disincentive to agricultural investment, further hindering economic growth. Poverty levels among farmers and fishermen are three times higher than for the rest of the population.