Republic of the Philippines
HOUSE OF THE REPRESENTATIVES
Quezon City
EIGHTEENTH CONGRESS
First Regular Session

House Bittno, 2136

Introduced by: REPRESENTATIVE CONRADO M. ESTRELLA II

EXPLANATORY NOTE

AN ACT TO STRENGTHEN THE RESILIENCY OF SMALL FARMERS AGAINST CLIMATE CHANGE AND
EXTREME WEATHER RISKS BY ESTABLISHING THE REGULATORY FRAMEWORK AND PROGRAM FOR A
FREE INDEX-BASED AGRICULTURE INSURANCE, PROVIDING THE SOURCE OF FUNDING THEREFOR, AND
FOR OTHER PURPOSES.

The Philippines, notwithstanding its famed agricultural acuity, is beset with its own entwined
environmental and agricultural challenges that are attributable to its being an agricultural country and an
archipelago at the same time.

The country which is known to be a very conducive ground for agriculture now bears its own share of the
negative effects of climate change which greatly varies the interplay of temperature and rainfall
immensely affecting the resulting agricultural yields. Further, being an archipelago which is situated at the
Pacific region, the Philippines proved to be a hotbed of natural phenomenon and natural disasters which
put the affected areas into great vulnerability’ more especially the smallholder farmers who are
considered to be the poorest of the economic sectors of the country.

Certainly, the adage that ‘prevention is better than cure’ does not hold enough all the time to our
smallholder farmers because despite the preventive measures that are already in place and the existence
of good laws on Climate Change and on Risk Reduction and Management, they still always end up to be
the most devastated at the aftermath of every passing disaster.

It is, therefore, the aim of this piece of legislation to provide our smallholder farmers a measure ~ in the
form of a weather index-based agriculture insurance (WIBCI) - that may greatly help them weather and

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riculture Sector Faces Greatest Impact from Climate Change.
instar.com.ph/article/426910



alleviate the adverse impacts of disastrous events which may leave them uncompensated, helpless, empty
handed or financially burdened.

‘The WIBC! approach addresses many of the challenges besetting the traditional insurance which utilizes
manual assessment procedures requiring the insurance professionals to physically visit the insured farm.
Further, WIBCI attracts more reinsurers than the traditional insurance does, thereby, decreasing the
burden on the insurer to diversify the risk internally. With this reduced burden, the insurer can quickly
increase their portfolio to cover more and more farms.?

While the Philippine Crop Insurance Corporation, in partnership with the Department of Agriculture,
launched the three year ‘Scaling-up Risk Transfer Mechanisms for Climate Vulnerable Agriculture-based
‘Communities in Mindanao’ or the ‘Weather Index-based Insurance Mindanao Project’ on November 2014,
the same ended on December 31, 2017.’

In this legislation seeking to strengthen our farmers’ resiliency against the destructive effects of climate
change and extreme weather risks, itis heretofore aimed that a free index-based agriculture insurance be
made not just a part of a program but rather be made into a law that shall stand on itself to lend enough
support mainly to our smallholder farmers and greatly to the economy of the Philippines which is highly
reliant on its agribusiness sector.

Thus, the approval of this bill is urgently requested.

‘ABONO Partylist

2 Mangesh Patankar; Weather Index Insurance Under CCAP
5 Funa, Dennis B. ; Agricultural Insurance in the Philippines. January 9, 2018.
https://businessmirror.com.ph/2018/01/09/agri e-philippines/



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Republic of Philippines
HOUSE OF REPRESENTATIVES
Quezon City
EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILLNO, 2136

Introduced by HON. CONRADO M. ESTRELLA Ill

AN ACT TO STRENGTHEN THE RESILIENCY OF SMALL FARMERS AGAINST CLIMATE CHANGE
AND EXTREME WEATHER RISKS BY ESTABLISHING THE REGULATORY FRAMEWORK AND
PROGRAM FOR A FREE INDEX-BASED AGRICULTURE INSURANCE, PROVIDING THE SOURCE
OF FUNDING THEREFOR, AND FOR OTHER PURPOSES

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

Section 1.Short Title. This Act shall be known as the Free Index-Based Agriculture Insurance (FIBAI)
Act of 2018."

Section 2.Declaration of Policy. It is the policy of the State to ensure food security, intensify food
production, and increase climate resiliency of the country's agricultural communities by ensuring the
availability of critical safety nets to help farmers and agricultural producers withstand the adverse impact
of disastrous weather events, facilitate their prompt recovery from crop damage or crop devastation which
have offen led to uncompensated losses, heavy financial burden and unpaid debts.

Recognizing the increasing frequency and/or severity of droughts, fires, floods and storms, the
Climate Change Act of 2009 (RA 9729) has sought to “create an enabling environment for the design of
relevant and appropriate risk-sharing and risk-transfer instruments;" and to "coordinate with local
government units (LGUs) and private entities to address vulnerability to climate change impacts of
regions, provinces, cities and municipalities.”

The Philippine Disaster Risk Reduction and Management Act of 2010 (RA 10121), has also
declared it the policy of the State to:


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a) xx’Uphold the people's constitutional rights to life and property by addressing the root

b)

0)

causes of vulnerabilities to disasters, strengthening the country's institutional capacity
for disaster risk reduction and management and building the resilience of local
‘communities to disasters including climate change impacts;"xx

xx "Incorporate internationally accepted principles of disaster risk management in the
creation and implementation of national, regional and local sustainable development
and poverty reduction strategies, policies, plans and budgets; "xx

xx "institutionalize the policies, structures, coordination mechanisms and programs with
continuing budget appropriation on disaster risk reduction from national down to local
levels towards building a disaster-resilent nation and communities," xx

In view thereof, the State shall strengthen and harmonize government initiatives and programs
to effectively address the weather and climate risks faced by small agricultural producers in the
Philippines, and extend crop insurance coverage to ensure food security and stronger resiliency in crops
and agricultural production.

In order to reach out and serve the greatest number Filipino farmers, fisher-folks and agricultural
producers, the State shall encourage private insurance service providers to complement the government
crop insurance programs by way of innovative risk sharing mechanisms, specifically weather index based
crop insurance programs.

Section 3. Definition of Terms. As used in this Act, the following terms shall be defined as follows:

a.

Insurance - is the service rendered by insurance providers to protect the insured clients against

the probability of a large unexpected loss through the transfer and sharing of risks to compensate
for unexpected but financially disastrous events. A contract of insurance is an agreement
whereby one party - the insurance provider -undertakes for an agreed consideration to pay
another party — the insured client/beneficiary — for loss, damage or liability arising from an agreed
contingent event.

. Crop insurance- is an insurance service to protect farmers and agriculture producers against

financial losses and uncertainties brought about by crop failures, pests, extreme weather


conditions and/or other causes beyond their control, as indicated in the insurance policy issued
by the insurance provider's to the client/s.

. Insurance Policy - is a document or certification issued by the insurance provider/s to the

insurance clients as proof that the latter is covered by an insurance service with the specified
terms, premium costs, trigger event, payout benefits, and duration of coverage as indicated in
the said document.

Weather Index-based Insurance (WIBI) - is an innovative insurance product that aims to provide
prompt insurance payout against the incidence of extreme weather conditions through the use
of scientifically measurable weather parameters such as rainfall, temperature, frost, humidity
and/or other gauges as proxy for actual loss using transparent indicators of the occurrence of an
adverse event.

. Payout- the amount paid or to be paid by the insurance service provider on account of the

‘occurrence of an agreed contingent event, such as the breach of an agreed lower or upper limit
in weather indicators, as specified in an insurance contract.

Triggers - threshold measurement points forthe selected weather index parameter or indicator
at which the insurance contract starts to pay out.

|. Reference Unit Area (RUA) - is a contiguous geographical area such as a group of barangays,

municipality or city as may be covered by or monitored through a Reference Weather Station
(RWS)

.. Reference Weather Station (RWS) - a specified meteorological station for each insurance

contract as the named reference station from which the observed weather parameter/s shall be
principally obtained. This may be a particular weather facility of the Philippine Atmospheric Geo-
Physical and Astronomical Services Administration (PAGASA), or any public or private WMO-
compliant private weather station, and/or any satellite-based weather observation service
recognized by intemational re-insurance providers.


i. Weather index risk analysts or weather calculator agents - are information support
professionals who specialize in meteorological, climatological and/or weather sciences,

providing expert scientific studies, technical information, computer models andlor
maintenance of automatic weather stations calibrated for use in the forecasting and
validation of weather occurrences and also in risk and actuarial analyses for weather index-
based insurance programs; Provided, that: said professionals shall register, whether as
individuals or corporate entities, with the Insurance Commission as third party professional
meteorological and weather information service providers subject to technical standards
provided for by PAGASA in terms of those engaged in the calibration of automatic weather
10 stations.

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12 j. Small Farmer/Producer — is a farmer whose total combined farm-holdings cover an area of not
2B more than five hectares.

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15 Section 4. Free Index-Based Agriculture Insurance Framework. There is hereby established a
16 _ nationwide Free Weather Index-based Agricultural Insurance (FIBAl) Program that shall operate under

17 the following policy framework:

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19 4.1 Weather Index-Based Insurance Product. The typical core features of an index-based
20 insurance product shall be present in a crop insurance contract under the Program, as follows:

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22 4.1.1 An agreed weather reference index, such as, but not limited to rainfall (mm), wind
23 speed (kilometers per hour) and temperature (degrees) whose quantification is provided
24 for each Reference Unit Area and for which data is monitored, reported and validated by
25 an independent third party weather information service provider such as PAGASA or
26 DOST-ASTI, |C-registered professional weather information services using and
27 maintaining automatic weather stations, or any satellite-based weather observation
28 service recognized by international re-insurance providers.

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30 4.1.2 A Reference Weather Station as the named meteorological station from which the
31 observed weather parameter shall be obtained and in the event of failure, a fall back
32 methodology maybe utilized for the validation of a weather index occurrence.

33


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4.1.3A Trigger - Reference Point.on the agreed index parameter the occurrence of which
activates the insurance payout;

4.1.4 A Payout or lump sum insurance payment amount based on apre-determined
schedule that takes into account the actual area planted and growth phase of the crop.

4.1.5 Phases of Crop Growth or Crop Cultivation that will be covered by specific terms
of the insurance - which may refer to a separate trigger and partial payout for each
phase of vegetative growth or crop cultivation stage, or a threshold indicator for one
whole cropping or growing period.

4.2 Insurance Service Providers. The FIBAI Program shall be open to all govemment and
Private sector insurance and re-insurance providers that will be accredited based on the policies
and guidelines to be formulated by the FIBA! Project Management Office created under this Act.
Weather Index-Based Agriculture Insurance providers shall be under the regulatory supervision
of the Insurance Commission.

4.3 Stakeholders and Participants. The main beneficiaries of the FIBAI program shall be the
Filipino farmers and agriculture and fisheries producers or farmers’ cooperatives who shall
register with their respective Local Government Units (LGUs) for the particular crop or production
insurance program offered by the LGU through accredited insurance providers. The LGUs may
set aside supplemental local funds to complement the premium subsidies that will be provided
by the national government. The beneficiary farmers may also pay premium for added insurance
features that may be offered by providers.

4.4 No Need for Calamity Declaration. Any breach of the insurance parameters as stated in
the FIBAI policy contracts shall be the sole trigger or basis for any payout and shall not require
the declaration of a state of calamity by the LGU in order to trigger the obligation of the insurer
to the insured farmers/producers.

Section 5. Program Administration. There is hereby created a FIBAI Program Management Office
(PMO) under the Office of the President (OP) that will focus on establishing the needed coordination


mechanisms to implement the program, and popularizing farmers’ regular use of Weather Index Based
Crop Insurance. the FIBAI-PMO shall:

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4 a. Coordinate with the various stakeholders, including the Department of Agriculture, National
s Disaster Risk Reduction & Management Council (NDRRMC), Local Government Units (LGUs),
6 farmers’ groups, insurance service providers and the scientific community, on the widest possible
7 implementation of the FIBA! program based on the rules and guidelines formulated by the FIBAI
8 Oversight Board;

9 b. Establish and maintain, a Weather Risk Data Center for index-based agriculture insurance,

10 which information may be obtained from various sources, including PAGASA, records of the
1 Philippine Crop Insurance Corporation, DOST-ASTI's Project NOAH, UP-Los Banos’ Project
12 SARAI, agriculture colleges and universities, other government research institutions, and
13 commercial sources such as satellite-based weather monitoring services;

14 c. Monitor, in coordination with the Insurance Commission, the progress and concems of all index-
1s based agriculture insurance providers in the country;

16 d. Ensure that the insurance pools, insurance companies and other providers of ancillary services
v7 are registered with the Insurance Commission.

18 e. Coordinate with the municipalities and cities and farmers’ cooperative federations that are eligible
19 to undertake the FIBA! Program in order to facilitate their access, registration and participation
20 to the FIBA! Program as group insurance clients/beneficiaries.

21 f. Undertake, in partnership with the scientific communities, the development and conduct of
22 relevant studies on other crops and agriculture produce as well as on other innovative modes of
23 tisk management that will encourage participation in index-based insurance and re-insurance;
24 and

25 g. Oversee, monitor and ensure compliance by the relevant parties in the implementation of the
26 Program and the provisions of the index-based insurance and re-insurance contracts following
27 guidelines issued by the Insurance Commission.

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29 The PMO shall be headed by an Executive Director, to be appointed by the President, who shall formulate
30 the agency's organization structure, strategic and operational plans, and annual budgets which shall not
31 exceed 2% of the total premium subsidies to be allotted for each fiscal year for approval and endorsement


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by the FIBAI Oversight Board. The PMO shall ensure adherence to the Micro-Agri Policy Framework
adopted by the Insurance Commission,

Section 6. FIBAI Oversight Board. An Oversight Board shall convene at least twice a year to monitor
and oversee the operation of the FIBA! program and the administration of all index-based agriculture
insurance in the country. This shall be composed of the heads of the following institutions and agencies,
or their designated permanent representatives:

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Insurance Commission, to serve as Chairman
Department of Agriculture
Department of Interior and Local Government

. Cooperatives Development Authority

National Disaster Risk Reduction and Management Council (NDRRMC)
Department of Science and Technology

. Three (3) farmers, representing farmer organizations or farmer cooperative federations from

the country's three major island groups - to be appointed by the President of the Philippines,
and

Three (3) representatives from the insurance industry, including the Philippine Crop
Insurance Corporation and two (2) from the private sector representing the non-life insurance
industry.

The Board shall have the following functions:

a

Confirm or approve the organization plans, strategic and operational plans, and annual
budgets to be submitted in the developed, managed, and monitored by PMO, with the end
in view of ensuring proper and transparent implementation of the Program with the widest
possible outreach for small farmers;

)._ Confirm the rules and guidelines for the implementation and monitoring of index-based crop

insurance programs, taking into account actuarially sound insurance and re-insurance
principles;


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c. Fix and regularly update the maximum levels of insurance coverage levels and maximum
premiums that can be used as basis for subsequent budgets of the FIBAI and other related
programs; and

d. Prepare, through the PMO, an annual report on the implementation and extent of availment
by farmers and LGUs of the FIBAI program.

Section 7. Role of PAGASA and Other Weather Information Providers. The Philippine Atmospheric
Geophysical and Astronomical Service Administration (PAGASA), consistent with its mandates under the
PAGASA Modernization Act of 2015 (or R.A. No. 10692), shall provide adequate, up-to-date, and timely
information on atmospheric, astronomical, and other weather related phenomena as well as assessments
pertinent to climate change adaptation programs, such as weather index-based insurance.

PAGASA, and other weather science research institutions and climate institutes in state
universities, shall continue to conduct and publish relevant weather damage and crop yield correlation
research and other scientific studies, prepare computerized analytical systems, and accessible weather
information analysis of future climate scenarios, among others.

PAGASA may partner with relevant scientific organizations, research institutes and/or private
‘sector entities for the implementation of specialized services and cost recovery programs and may collect
a minimal service fee for its weather data certifications.

The accredited index-based insurance service providers may also opt to partner with or subscribe
to recognized satellite-based weather information service agencies as their alternative source and basis
for determining the weather thresholds and risk levels. Insurance providers utilizing satellite-based
weather information services shall report to the FIBAI-PMO details on the objectivity and reliability of such
weather information facilities. The assistance of meteorological information support professionals may
be sought to calculate and analyze the risk levels or provide computations to complement the data from
weather stations of PAGASA and DOST facilities and other monitored public or privately-owned weather
sensors.

Section 8.Role of Local Government Units. The FIBA| Program shall be implemented by city
and municipal LGUs for the farmers and farm crops within their areas of jurisdiction. The LGU shall
campaign and advocate for the FIBAI program as a group or community crop insurance facility and


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conduct information and education programs with the help of their barangay officials and representatives
of participating insurance providers. The farmers shall formally register with the Municipal or City
Agriculturist at least 45 days prior to the start of crop planting. The participating insurance institution shall
provide the group insurance policy through the LGU and, in tur, the LGU shall distribute the appropriate
sub-policy contracts to the beneficiary farmers for their respective free weather index crop insurance,
indicating the name of the farmer and crop to be insured, farm area and location, start of planting and
expected harvest schedule and their estimated cost of production using their latest expected prices of
farm inputs.

The Municipal or City Agriculturist and the insurance provider shall electronically collate the
farmers’ insurance information and submit these to FIBAI-PMO at least 20 days prior to the start of the
planting season.

Section 9. Role of Insurance Pool. All nor-ife insurance companies duly licensed by the
Insurance Commission shall participate in the FIBA program through an Agri-Insurance pool. The
structure and operations guidelines of the said pool shall be approved by the Insurance Commission. The
‘Agri-Insurance pool shall be composed of local, duly licensed and compliant insurance companies who
will subscribe in the pool a minimum of one (1%) of the required statutory net worth.

Section 10. Free Premium and Source of Funding. To subsidize the free premiums of farmers
under the FIBA! Program, the amount of Six Billion pesos (P6.0 billion) shall be set aside from their
current year’s unprogrammed Risk Management Fund and/or from the unutilized or unreleased portions
of the National Disaster Risk Reduction Funds to form the initial FIBA! Premium Subsidy Fund.
Henceforth, this FIBA! Premium Subsidy Fund shall be included as an additional line item in subsequent
annual national appropriations, as a separate component of the Climate Change adaptation and disaster
tisk mitigation, the amount of which shall be automatically augmented in proportion to the applicable
inflation rate adopted by the Development Budget Coordinating Council for the ensuing year.

The insurance premium subsidies for the crops and farms of the insured farmers shall be securely
transmitted electronically to the selected insurance provider or insurance pool based upon the submission
of the lists and data of insured farmers by the LGUs and/or CDA-accredited cooperative federations to
the PMO; Provided that the average premium subsidy amount for the insurance coverage of the pool will
not exceed six percent (6%) of the average cost of production of the totality of covered crops. Premium


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remittance shall be made within thirty (30) days from confirmation by FIBAI-PMO of the covered farms
and farmers.

The insurance service providers shall immediately submit reports to the concemed LGU and the
FIBAI-PMO on their covered farms and insurance clients for the relevant Reference Unit Areas. The
insurance providers may independently conduct marketing activities to advertise and popularize their
insurance services.

Section 11. Climate Risk Mitigation Fund for Small Farmers. There is hereby created a
Climate Risk Mitigation Fund for Small Farmers to be managed by the FIBAI-PMO. Any and all unutilized
amounts under the FIBAI program for any given year shall accrue to this Fund and may be used to further
‘enhance index-based crop insurance in the country such as any of, but not limited to the following
purposes: institution and capacity building in the various regions of the country, information and education
‘campaigns for all agriculture-based municipalities and cities, the enhancement and updating of the
weather risk analytics centers, and improvement of communication and coordination between and among
the key stakeholders, especially the small farmers.

Section 12. Exemption from the Procurement Law (R.A. 9184). The procurement of weather
index-based crop insurance services under this Act shall be exempt from the coverage of Republic Act
9184, provided, that:

a. The insurance provider is comprised of a pool of insurance companies formed as a joint

venture with capitalization that is at least equal to the amount of premium to be collected;

b. The insurance to be procured is a group insurance policy for a composite set of farmer clients

within a municipality or a set of barangays;

c. The insured farms have been mapped and are within coverage of a Reference Weather

Station or a satellite remote sensing service;

d. Validation services of an independent third party weather information meteorological

calculator agents is registered with the Insurance Commission; and

e. The composite set of barangays, municipalities, provinces and/or regions are packaged with

a balanced profile of high risk and low risk areas, as may be approved or coordinated by the
FIBAI-PMO.


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Services to be provided by actuarial professionals, calculator agents and/or specialized weather risk
analysts accredited by the FIBAI-PMO and IC shall also be exempt from R.A. 9184, provided that their
professional fees shall not exceed 6% ofthe insurance premium.

Section 13. Tax Exemptions, All premium payments paid for index-based insurance contracts
registered with the LGUs and coordinated with the FIBALPMO shall be exempt from VAT and other
relevant transaction taxes, including Documentary Stamp Taxes.

Section 14. Mandatory Agri-Insurance Quota - All non-life insurance companies authorized to
do business in the Philippines are mandated to subscribe to the insurance pool or to ensure that a
minimum of five percent (5%) of their gross written premiums shall be in the agriculture sector.

Section15. Penalty Clause - The Insurance Commission shall strictly monitor the compliance of
all non-life insurance institutions with respect to the Agri-Insurance Quota as provided for in the preceding
section. Administrative sanctions and other penalties shall be imposed by the Commission for non-
compliance with the provisions of this Act, which shall be equivalent to two percent (2%) of the premium
value of non-compliance with the Agri-Insurance Quota based on their total insured interests for the year.

For the agricultural areas and communities covered under the FIBAI Program, the elected LGU
Officials and key administrative officers, including but not limited to the Mayor, Vice Mayor, Municipal/City
Administrator, Municipal/City Agriculturist, Treasurer, and Accountant shall be administratively liable for
non-implementation of the weather index insurance for their constituent farmers, subject to Book V-Title
\-Subtitle A-Chapter 7 (Discipline) of the Administrative Code (E.0. 292)under its Civil Service
Commission Subtitle, as amended, and Rule XI (Penalties) under the Code of Conduct and Ethical
‘Standards for Public Officials and Employees, (R.A. No. 6713).

Section 16. Transitory Provisions. The FIBA Program shall initially cover the staple crops,
namely: ice and com farms, in the Top 30 rice and com producing provinces of the preceding year based
cn data from the Philippine Statistical Authority. This is without prejudice to including farmers in more
provinces, municipalities and contiguous areas as the FIBAI-PMO, LGUs and that the insurance providers
may be able to coordinate.


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Within a period of five years from the approval of this Act, the PMO shall coordinate and partner
with the scientific community and relevant research and academic institutions on the development of
weather risk models for crop yield and crop damage based on Philippine climate information and data
and other studies to widen the coverage of weather index-based insurance to other agriculture crops and
livestock.

Section 17. Implementing Rules and Regulations. Within sixty days from the effectivity of this
Act, the Insurance Commissioner shall convene the FIBAI Oversight Board to formulate and adopt the
Implementing Rules and Regulations of this Act within the ensuing period of three months. The IC shall
initially provide secretariat support to the Board, pending the establishment of the FIBAI-PMO which shall
then become the secretariat of the Board.

Section18. Repealing Clause. All laws, executive orders, rules and regulations, or parts thereof,
inconsistent herewith are hereby repealed or modified accordingly

Section 19. Separability Clause. The provisions of this Act are hereby declared to be separable.
If any provision of this Act shall be held unconstitutional, the remainder of the Act not otherwise affected

shall remain in full force and effect.

Section 20. Effectivity. This Act shall take effect upon its publication in the Official Gazette.