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Republic of the Philippines
HOUSE OF REPRESENTATIVES,
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

House BILL NAS 78

el SRS ED

Introduced by Rep. Christopher P. de Venecia

EXPLANATORY NOT

Agriculture is highly vulnerable to the unpredictability of nature. With
agricultural production representing a major source of livelihood for 33% of Filipinos,
the impact of natural disasters and other agricultural risks cannot be taken lightly, The
need (o safeguard the livelihood and interests of local farmers, fisherfolks and even the
upland dwellers should be properly addressed.

Droughts, floods and typhoons have been wreaking havoc on crops and fishery
products causing untold stories of misery among farmers and fisherfolks. In 2009,
monsoon rains and floods brought about by Typhoons Ondoy and Pepinig struck Central
and Northern Luzon resulting to crop losses amounting to P23. billion, followed by the
fisheries sub-sector with P1.2 billion. In all, the storms adversely affected about 480,000
farmers in seven regions of Luzon, Damage to agriculture due to Typhoon Pablo which
struck Eastern Mindanao, meanwhile, had reached P11.23 billion as of December 12,
2012 with the banana sub-sector and other high-value crops suffering the biggest losses
at P7.4 billion,

And who would have forgotten the massive agricultural losses caused by
Category 5 Typhoon Yolanda in 2013. The coconut sector alone recorded $396 Million
or approximately P19 Billion in losses (FAO, 2014). This is just a small chunk compared
to other sectors such as rice and com farming, fisheries, livestocks, and agroforestry.
Meanwhile, the el-nifio phenomenon has severely affected Mindanao damaging P5.32
Billion worth of crops, leaving farmers extremely hungry. ‘The gravity of damage may be
incalculable but, certainly, much of these losses are carried by our very own farmers and
fisherfolks.

Agricultural and fisheries products need insurance coverage to mitigate the
debilitating effects of natural disasters and other agricultural risks. Agricultural
insurance is a risk management tool designed to ease property and production losses

"9,


especially to subsistence farmers and fisherfolks. It also serves as a financial mechanism
to stabilize financial fluctuations suffered by the country’s lending institutions.

At present, Presidential Decree (PD) 1467 as amended by PD 1733 and Republic
Act (RA) 8175, otherwise known as the “Revised Charter of the Philippine Crop
Insurance Corporation (PCIC) Act of 1995” cover both agricultural crop and non-crop
related insurance, Almost eighty five percent (85%) of the crop-related insurance
coverage is focused on rice and corn, while the rest are on high-value crops and
livestock. Non-erop insurance, on the other hand, covers agricultural machineries and
personal life insurance of farmers and fisher folks

Meanwhile, RA 8550 otherwise known as the “Fisheries Code of 1998” and
Fisheries Administrative Order No. 215, series of 2001 (Insurance for Aquaculture
Crops/Stocks) provide for limited insurance coverage of aquaculture under the
insurance program of the PCIC but the program has yet to be fully operational.
Agroforestry crops, forest plantations and non-crop agricultural assets such as farm
machineries, transport facilities and other related infrastructures are not yet covered,

Extending a more comprehensive and sustainable agricultural insurance
coverage to both the agriculture and the fisheries sectors (i.e. coverage for losses caused
not only by force majeure but also by plant and fish diseases) through legislation is
therefore necessary to hasten effective implementation of the program? Policy setting
via administrative fiat or through a corporate board’s authorization is only ad hoe in
nature and lacks the enforceability of a law.

The PCIC, however, remains in dire need of financial resources to fully
implement its various programs. Under RA 8175, authorized capital stock of PCIC was
increased from P750 million to P2 billion, ‘The increased capitalization was supposed to
allow PCIC to come up with internally generated funds through investment strategies
and earnings to answer for the agency’s overhead expenses. After 15 years, the
increased capitalization has not yet been fully paid; hence its high operational expense is
not being fully met by investment yields. As of December 2009 PCIC’s paid up capital
only stood at P1.23 billion. A more updated data gathered from the PCIC shows that as
of October 6, 2011, the national government has yet to pay P259.05 million for the
common stock it subscribed.

Premium subsidies to the agency, meanwhile, are either not delivered on time or
not delivered completely. PCIC data reveals that total receivables from the national
government in terms of premium subsidy arrearages have reached P493.59 million as of
October 2011


The shortfalls in capital contribution and subsidy on premium shares greatly
minished PCIC’s investment capacity, making investment income barely enough to

cover indemnity and administrative costs. But more importantly, this funding constraint
has limited PCIC’s reach to provide insurance cover to more than 5.4 million
smallholder farmers and fisherfolks in the country, Only three percent (3%) of these
have some form of risk protection from PCIC, While the government has provided P1
billion for insurance premium subsidy of Agrarian Reform Beneficiaries under the 2013
national budget, the directive is not institutional in nature,

To help sustain the agricultural insurance’s funding requirement and fully
expand insurance coverage, this proposed measure seeks to inerease PCIC’s authorized
capitalization from P 2 billion to P 10 billion. ‘The proposal also requires the Philippine
Charity Sweepstakes Office (PCSO) to contribute a yearly amount of Ten Million Pesos
(P10,000,000,00) from its charity fund to the crop insurance program, Said amount
shall be directly remitted by the PCSO to the Corporation yearly until the unreleased
premium subsidy is fully paid, Currently, RA 8175 requires the PCSO to earmark ten
percent (10%) of its net earnings from lotto operations for PCIC’s equity requirement.
A 2008 Commission on Audit report, however, revealed that PCIC has no way of
ascertaining the correctness of the percentage amount remitted by PCSO, as it just
accept whatever amount is remitted by the latter

To help safeguard PCIC’s limited resources and hasten the release of claims to
legitimate applicants, this bill also imposes heavier fines to spurious claimants. Erring
agency personnel who help facilitate processing of false claims are likewise meted with
stiffer penalties which include dismissal and forfeiture of separation benefits. With these
additional provisions, it is hoped that the viability and sustainability of the program
would be enhanced.

In view of the foregoing, { am re-fling this bill that was initially filed by former
Representative Gina P. de Venecia in the 16" Congress. This version has passed Third
Reading of the House and was transmitted to the Senate but was not acted upon.

The approval of this proposed measure is earnestly sought.

[fou
REP. all HER P. DE VENECIA

4" District, Pangasinan


Republic of the Philippines
HOUSE OF REPRESENTATIV!
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. 4578

Introduced by Rep. Christopher P. de Venecia

AN ACT
STRENGTHENING THE PHILIPPY CROP INSURANCE
CORPORATION (PCIC), AMENDING FOR THE PURPOSE
PRESIDENTIAL DECREE NO. 1467, AS AMENDED,
OTHERWISE KNOWN AS THE CHARTER OF THE PHILIPPINE,
CROP INSURANCE CORPORATION

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

SECTION 1. Section 1 of Presidential Decree No, 1467, as amended, is hereby

further amended to read as follows:

5C. 1. Creation of the Philippine Crop Insurance Corporation, —
There is hereby created a body corporate to be known as the “Philippine
Crop Insurance Corporation” (PCIC and herein called the Corporation)
which shall be attached to the Department of Agriculture [for budgetary
purposes]. The Corporation shall insure qualified farmers AND

FISHERFOLK against losses au
FORTUITOUS EVENTS, plant AND FISH diseases and pest
infestations. [Initially] [t]The Corporation shall provide insurance
coverage for palay AND CORN crops, HIGH-VALUE COMMERCIAL
CROPS, LIVESTOCK, AQUACULTURE AND FISHERY PRODUCTS,
AGROFORESTRY CROPS AND FOREST PLANTATIONS; [and later

on to other crops without prejudice to the inclusion of other] non-crop

from natural calamities,

agricultural assets such as but not limited to machineries, equipment,
transport facilities and other related infrastructures[:], AND LIFE AND
ACCIDENT TERM INSURANCE COVERAGE FOR FARMERS AND


FISHERFOLK, as the Board of Directors of the Corporation may

determine. Such crop insurance shall cover, in ever e, the cost of

production inputs, the value of the farmer’s OR FISHERFOLK’S own
labor and those of the members of his household, including the value of
the labor of hired workers, and a portion of the expected yield as the
Board of Directors, in its diseretion, decide to insure. Such insurance
protection, however, shall exclude losses arising from avoidable risks

emanating from or due to the negligence,

isance or fraud committed
by the insured or any member of his immediate farm household or

employee or the failure of the insured to follow proven farm practices,

THE CORPORATION SHALL ALSO INSURE PROPERTIES
AND FACILITIES WHICH ARE OWNED OR USED BY
GOVERNMENT AGENCI INVOLVED IN AGRE HERY-
FORESTRY — PROJECTS/ACTIVITI AND = GOVERNMENT-
FINANCED — AGRI-FISHERY-PFORESTRY PROJECTS. THE
CORPORATION SHALL PROVIDE REINSURANCE COVERAGE TO.
AGRI-FISHERY-FORESTRY PROPERTIES AND FACILITIES
UNDERWRITTEN BY PRIVATE AND GOVERNMENT INSURANCE
COMPANIES.”
SEt

>. 2. Subsections 3.5 and 3.11 of Section 3 of Presidential Decree No. 1467,

as amended, are hereby further amended to read as follows:

“SEC, 3. Powers, - The Corporation shall have the following
powers:
XXX
3.5. To insure the [rice production] CROPS of farmers AND
F

SHERFOLK against loss, damage and destruction caused by
natural calamities such as typhoons, floods, drought, earthquake,
volcanic eruptions, rodents, vermin|s], diseases, insects and other
pests; and to carry on any business necessary, related to and
expedient for the above purpose:

XXX

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3.11, To generate internal funds by floating bonds, [expansion to
other] EXPANDING THE CORPORATION’S insurance lines
and extending coverage to other areas of agriculture[,] SUCH AS
LIVESTOCK, AQUACULTURE, FISHERY,
AGROFORESTRY, AND FOREST PLANTATIONS in order to
address insurance needs of the target sector and to do and perform
acts and things and to exercise all the general powers conferred by
law upon the Corporation as are incidental or conducive to the

attainment of the objectives of the Corporation.”

SEC. 3, Section 5 of Presidential Decree No. 1467, as amended, is hereby further

amended to read as follows:

EC. 5 Rate of Premium and its Sharing, ~ The rate of premium,
as well as the allocated sharing thereof [by the] OF farmers,
FISHERFOLK, [the] lending institutions, the Government of the Republic
of the Philippines (herein called the Government) and other parties, shall
be determined by the Board of Directors of the Corporation: Provided,
‘That the share of the Government in the premium cost in the form of
premium subsidy, shall be limited to subsistence farmers AND
FISHERFOLK:

Provided, however, That each of these subsistence
farmers is cultivating not more than seven (7) hectares OF FARMLANDS
AND EACH FISHERFOLK IS CULTIVATING NOT MORE THAN
FIVE (5) HECTARES OF THE FISHPOND, SEAWEED, OYSTER OR
MUSSEL FARM by themselves or with the help of the labor of the
members of their households or hired labor, the premium rate and sharing

to be determined by the Board of Directors subj

to approval by the
President of the Philippines: Provided, firther, That the premium share of
the subsistence farmer OR FISHERFOLK shall be reasonably affordable
by him: Provided, fivthermore, That the Government shall share in the
premium cost only in insurance coverage against unforeseen and
unavoidable risks such as, but not limited to typhoons, droughts,

outbreaks of pests and diseases: Provided, finally, That premium subsidy


and/or insurance benefits shall upon the accumulation of surplus funds, be

increased to such amount as may be determined by the Board taking into
consideration that the Corporation has been established not only for profit

but mainly to help the insured in their direst hours of need.”

SEC. 4. Subsections 6.3 and 6.5 of Section 6 of Presidential Decree No. 1467, as

amended, are hereby further amended to read as follows:

“SEC. 6. Premium Subsidy. —

XXX
6.3 Unappropriated and/or unreleased government premium
subsidy for policies written for the period from May 1, 1981 up to
DECEMBER 31,

11 {the approval of this Act] computed on the
basis of premium rates and sharing previously approved by the
President as authorized by law shall be programmed for payment
by the Government [within a period of ten (10) years from the

approval of this Act], and the yearly sums shall be included in the

budgetary appropriations for submission to Congress, starting the

fiscal year following approval hereof, in addition to the premium
subsidy requirement of the year involved.
XXX

6.5 [Ten percent (10%) of the net earnings of] THE. Philippine

Charity Sweepstakes Office (PCSO) [from its lotto operation shall
be earmarked from] SHALL CONTRIBUTE A YEARLY
AMOUNT OF TEN MILLION PI S (P10,000,000.00) FROM.
ITS CHARITY FUND TO the Crop Insurance Program and said

amount shall be directly remitted by the PCSO to the Corporation
YEARLY [every six (6) months} until the [amount of]

UNRELEASED = PREMIUM ~— SUBSIDY _ [government

subscription] is fully paid.”

SEC. 5. Subsections 8.1, 8.3, 8.4.1, 8.4.3, and 8.5 of Section 8 of Presidential

Decree No, 1467, as amended, are hereby further amended to read as follows:


“SEC. 8. Capital Stock. -

8.1. The authorized capital stock of the Corporation is TEN
BILLION PESOS (P10,000,000,000.00) [Two billion pesos
(P2,000,000,000)] divided into SEVENTY-FIVE MILLION

(75,000,000) [Fifteen Million (15,000,000)] common shares with a

par value of One hundred pesos (P100,00) each share, which shall
be fully subscribed by the Government and TWENTY-FIVE
MILLION (25,000,000) [Five Million (5,000,000)] preferred
shares with a par value of One hundred pesos (P100.00) per share
which shall have the features as provided in Section 8.4 hereof and
shall be issued in accordance with the provisions of Section 8.5
hereof,

HR

8.3 The additional common capital stock of SIX BILLION PESOS.
(P6,000,000,000.00) [One Billion pesos (P1,000,000,000)] shall

be fully subscribed by the Government and the necessary funds
shall be appropriated by Congress unless otherwise provided by
existing laws: Provided, That Congress shall provide, on an annual
basis, [at least fifty percent (50%) of] the needed capital, until the

authorized capital stock is fully paid up.

8.4 The preferred shares shall be entitled to a preference over
common shares in any declaration of dividends. ‘They shall also
be given priority in the distribution of assets in the event of

liquidation of the Corporation. They shall have the following

specific features

8.4.1 Preferred as to dividends at a minimum of ONE
AND ONE-HALF PERCENT (1.5%) OR THE
PREVAILING 360-DAY TREASURY BILL RATE AT
THE TIME OF DECLARATION OF DIVIDENDS,
WHICHEVER IS HIGHER [six percent (6%)]

XXX


8.4.3 NON-Participating;

XXX

85 AT LEAST FIVE HUNDRED MILLION PESOS
(P500,000,000.00) OF PREFERRED SHARES SHALL BE
SUBSCRIBED AND PAID FOR BY THE LAND BANK OF
THE PHILIPPINES. THE BALANCE OF the preferred shares

may be available for sale or to subscription by the general public.”

SEC. 6. Section 8-A of Presidential Decree No, 1467, as amended, is hereby

amended, to read as follows:

8-A, RESERVE FUND FOR CATASTROPHIC LOSSES.
- A state reserve fund for catastrophic losses in the amount of
Hundred Million Pesos (P500,000,000.00) shall be created exclusively to

Five

answer for the proportion of all losses in excess of risk (pure) premium
under the Corporation’s Crop Insurance Program for small farmers AND
FISHERFOLK. THE FUND MAY BE INCREASED SUBJECT TO THE
APPROVAL OF THE PRESIDENT. The Fund shall be administered by a

government financial institution to be designated by the Corporation’s

Board of Directors. Such sum as may be necessary for the purpose shall
be funded by the National Government through the annual General
Appropriations Act starting the calendar year immediately following the
approval of this Act and every year thereafter until the full amount is
completed. The mechanics of claims against the Fund and to what extent
the Fund shall be liable shall be determined jointly by the financial
institution administering the Fund, subject to the approval by the

President.”

SEC. 7. Subsection 9.1 of Section 9 of Presidential Decree No. 1467, as

amended, is hereby further amended, to read as follows:

“SEC. 9. Board of Directors. -


9.1. The powers of the Corporation shall be vested in and
exercised by a Board of Directors now composed of seven (7)
members and made up of the following: the President of the Land
Bank of the Philippines (LBP), the President of the Corporation,
the SECRETARY OF THE DEPARTMENT OF
AGRICULTURE (DA) [Executive Director of the Agricultural

Credit Policy Council (ACPC)], a representative from the private

insurance industry to be nominated by the Secretary of Finance
and three (3) representatives from the subsistence farmers sector,
preferably representing agrarian reform beneficiaries/cooperatives!
associations coming from Luzon, Visayas, and Mindanao, who
shall be selected and nominated by the different farmers
organizations and/or cooperatives. The respective nominees of the
private insurance industry and the farmer's sector shall be
submitted to and appointed by the President. ‘The chairman of the
Board of Directors shall be appointed by the President from
among the members of the Board of Directors. The President of
the Corporation shall also be appointed by the President and shall
be ex-officio vice chairman who shall assist the chairman and act
in his stead in case of absence or incapacity. In case of absence or
incapacity of both the chairman and the vice chairman, the Board
of Directors shall designate a temporary chairman from among its
members, Except for the President of the LBP and the
SECI
Agricultural Credit Policy Council (ACPC)], all members of the

ETARY OF THE DA [Executive Director of the

Board of Directors, including the President of the Corporation,
shall be appointed by the President within a reasonable period of

time after the approval of this Act.”

SEC. 8. Separability Clause If any provision or part hereof is held

unconstitutional or invalid, the other provisions not affected shall remain in force and

effect.

10


SEC. 9. Repealing Clause— All laws, executive orders, and other issuances or

parts thereof inconsistent with this Act are hereby repealed or modified accordingly

SEC. 10, Effectivity. - This Act shall take efffect fifteen (15) days after its

publication in the Official Gazette or in a newspaper of general circulation

Approved,

i