Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SIXTEENTH CONGRESS
First Regular Session

House BILLNo.__ 2074

BY REPRESENTATIVES DE VENECIA and TEVES

EXPLANATORY NOTE

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

Data from the Department of Agriculture indicates the vulnerability of the sector to
the unpredictability of nature. Droughts, floods and typhoons have been wreaking
havoc on crops and fishery products causing untold miseries among farmers and
fisherfolks. In 2009, monsoon rains and floods brought about by Typhoons’ Ondoy
and Peping struck Central and Northern Luzon within a three-week period and
destroyed properties and infrastructure worth billions of pesos. The crops sub-
sector bore the major brunt of the immediate losses (P23.5 billion), followed by the
fisheries sub-sector (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 last year, 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.

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 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-

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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-crop 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
hoc 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
diminished 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 (3%) percent
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 increase 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) 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, approval of this proposed measure is earnestly sought

hha ‘ wn fide My —
HON. MA. GEQRGINA P. DE VENECIA
istri

Fourth , Pangasinan

HON. PRYBE HENRY A. TEVES
Third Ditrict, Negros Oriental


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SIXTEENTH CONGRESS
First Regular Session

House BILLNO.___ 2074

BY REPRESENTATIVES DE VENECIA and TEVES

AN ACT
STRENGTHENING THE PHILIPPINE CROP INSURANCE
CORPORATION, AMENDING FOR THE PURPOSE PRESIDENTIAL
DECREE NO. 1467, AS AMENDED

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

SECTION 1. Section 1 of Presidential Decree No. 1467, as amended, is
hereby further amended to read as follows:

"SECTION 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. The Corporation shall insure qualified farmers and
fisherfolk against losses arising from natural calamities, fortuitous
events, plant and fish diseases and pest infestations.

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; on-
crop 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 every case, the cost of production
inputs, the value of the farmer's and 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 discretion, decide to insure. Such insurance
protection, however, shall exclude losses arising from avoidable risks
emanating from or due to the negligence, malfeasance 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 and/or used by government agencies involved in
agri-fishery-forestry projects/activities and government-financed agri-



fishery-forestry projects. The Corporation shall also provide
Teinsurance coverage to agri-fishery-forestry properties and facilities
underwritten by private and government insurance companies.”

SEC. 2. Subsections 3.5.and 3.11. of Section 3 of Presidential Decree1467,
as amended, are hereby further amended to read as follows:

“SEC. 3.Powers. - The Corporation shall have thefollowing
powers:

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"3.5. To insure the produce of farmers and fisherfolk against
loss, damage and destruction caused by natural calamities such as
typhoons, floods, drought, earthquake, volcanic eruptions, rodents,
vermins, disease, insects and other pests; and to carry on any
business necessary, related to, and expedient for the above
purpose;

Xxx

“3.11, To generate internal funds by floating bonds, expansion
to other insurance lines and extending coverage to other areas of
agriculture, livestock, aquaculture and fishery, agroforestry and forest
plantations in order to address the 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 orconducive to the attainment of the objectives of the
Corporation.”

SEC. 3. Section 5 of Presidential Decree No. 1467, as amended, ishereby
further amended to read as follows:

“SEC. 5.Rate of Premium and its Sharing. - The rate of
premium, as well as the allocated sharing thereof by the farmers, the
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 musselfarm 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 subject to approval by the President of the Philippines:
Provided, further, That the premium share of the subsistence farmer
or fisherfolk shall be reasonably affordable by him: Provided,
furthermore, 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 direct 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, 2012 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 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 for the year
involved.

XXX

"6.5, The Philippine Charity Sweepstakes Office (PCSO) shall
contribute a yearly amount of Ten Million Pesos (P10,000,000) from
its charity fund to the Crop Insurance Program and said amount shall
be directly remitted by the PCSO to the Corporation yearly until the
unreleased premium subsidy is fully paid.”

SEC. §.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) divided into Seventy-Five Million
(75,000,000) common shares with a par value of One Hundred Pesos
(P100) each share, which shall be fully subscribed by the Government
and Twenty-Five Million (25,000,000) preferred shares with a par
value of One Hundred Pesos (P100) 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.

XXX

“8.3. The additional common capital stock of Six Billion Pesos
(P6,000,000,000) shall be fully subscribed by the Governmentand the
necessaty funds shall be appropriated by Congress unless otherwise
provided by existing laws: Provided, That Congress shall provide, on
an annual basis, the needed capital, until the authorized capital stock
is fully paid up.


XXX

“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;

XXX
“8.4.3. Non-Participating;
XXX

“8.5At least Five Hundred Million Pesos (P500,000,000) 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
further amended to read as follows:

“Sec, 8-A. Reserve Fund for Catastrophic Losses. A State
reserve fund for catastrophic losses in the amount of Five Hundred
Million Pesos (P500,000,000) shall be createdexclusively to answer
for the proportion of all losses in excess of risk (pure) premiums under
the Corporation's Crop Insurance Program for small farmers and
fisherfolk, The fund maybe 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 beliable shall be determined jointly by the financial
institution administering the Fund, subject to the approval by the
President.”

SEC. 7. Section 17-A of Presidential Decree No. 1467, as amended, is hereby
further amended, to read as follows:

"Sec.17-A. Penal Provisions. — Any person who through
malfeasance, misfeasance or nonfeasance allows a spurious claim to
be paid, including the claimant himself, shall, upon final conviction, be
punished by imprisonment of not less than three (3) years but not
more than eight (8) years or a fine of not less than One Hundred
Thousand Pesos (P100,000) but not more than Six Hundred
Thousand Pesos (P600,000) or both at the discretion of the court.


The PCIC personnel who allowed the commission of the offense
shall, in addition, be dismissed from office, and forfeit all privileges
and benefits which may accrue to him.”

SEC. 8.Separability Clause. — If any provision or part hereof is held
unconstitutional or invalid, the other provisions not affected shalll remain in full force
and effect.

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 effect fifteen (15) days after its
complete publication in at least two (2) newspapers of general circulation.

Approved,