Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

House BILLNo. 401

Introduced by HON. LUIS RAYMUND “LRAY” F. VILLAFUERTE, JR.

EXPLANATORY NOTE

A farmer in South Upi, Maguindanao took his own life after a prolonged dry
spell caused by El Nifio ravaged his farm in 2016, and crushed his hopes of
providing food and money for his family’, This man gives us a glimpse of the often
unseen extreme poverty faced by Filipino farmers every day caused in a large part
by natural disasters that hit the Philippines annually.

In February 2018, the eruption of Mt. Mayon caused damage in the agriculture
sector amounting to Php 158M. It affected at least 9,791 farmers and around 7,131
hectares of land in the region’, The rice losses affected 5,750 farmers. Before the
year closed, Typhoon Ompong made landfall in Northem Luzon and caused total
damage worth Php 278. This was second only to the destruction caused by Typhoon
Haiyan recorded at Php 35B.

Every year, our poor farmers face natural disasters of grave pecuniary
consequences. An average farmer can lose up to Php 50,000 a year in lost
productivity due to extreme weather events.? This bill proposes that the State update
its existing crop insurance policies for Filipinos in the agriculture sector. It is true that
we have the Philippine Crop Insurance Corporation but thus far it has had too few
participants and very miniscule outreach compared with the total number of farmers
that it is supposed to serve.

From 2013 up to 2017, Congress appropriated an average of Php 1.55 billion
per year to subsidize the PCIC insurance premiums on up to 600,000 hectares of
tice farms in a number of provinces. Still, against a total of almost Php 380 billion in
palay production in 20144, the Philippine Crop Insurance Corporation has been
insuring only around Php 12.2 Billion worth of crops annually or roughly 3% of
potential insurable value.® In short, the greater numbers of our small farmers remain
uninsured simply because of the inadequate resource base of the PCIC.

"np: manilines neunger drives snaguindano-farmer-to-commitsuicde43353/
2 pen sapprconation 95520 aprietra-dmage ropa volcano

* aps: rapplercommove-phisueshunger/5292-climate-change-Tood- secu) ph
‘wep ov ph

® Computed based on data farmers eistered as derived frm PCIC website


In order to effectively reach and serve more of our country's five million small-
hold farmers and provide them with greater resiliency, this bill proposes to involve
the private sector and adopt a more relevant strategy. The private sector shall be
screened and accredited before they engage in insurance provisions; it shall be
ensured that they are financially capable and swift in the performance of
assessments and release of funds to benefit every disaster-struck farmer.

Our farmers need our utmost support and assistance, especially during times

of extreme need. In consideration of the foregoing premises, the swift passage of
this bill, a counterpart bill of Senator Villars in the Senate, is humbly sought.

LUIS MUND “A/RAY” F. VILLAFUERTE, JR.


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Queson City

EIGHTEENTH CONGRESS
Second Regular Session

HOUSE BILL NO. 491

Introduced by HON. LUIS RAYMUND “LRAY” F. VILLAFUERTE, JR.

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 FREEWEATHER INDEX-
BASED CROP 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 Crop
Insurance (FIBCI) Act’.

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 often lead
them 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 it declared policy of the State to:

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

b) Xx "Incorporate internationally accepted principles of disaste 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-resilient 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
program.

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 undertakes for a consideration to indemnify another against

loss, damage or liability arising from an unknown or 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.

Weather Index-based Crop Insurance (WIBC)) - 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 and 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 event, such as the breach of an agreed
lower or upper limit in weather indicators, as may be indicated in an
insurance contract.

.. Triggers - threshold measurement points for the 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 or monitored by
a Reference Weather Station (RWS).

|. Reference Weather Station (RWS) - a specific meteorological station for
each insurance contract as the named reference station from which the


observed weather parameter/s shall be obtained. This may be a particular
weather facility including: (1) weather stations and rain gauges of Philippine
Atmospheric Geo-Physical and Astronomical Services Administration
(PAGASA); (2) automated weather stations (AWS) under Project NOAH of
the Department of Science and Technology - Advanced Science and
Technology Institute (DOST-ASTI); (4) any WMO-compliant or
internationally certified private or university-based weather station; and/or
(4) satellite-based remote sensing and weather observation services.

h. Small Farmers/Producers - are those farmers whose combined farm-holdings
cover an area of not more than five hectares.

Section 4. Free Index-Based Crop Insurance Framework. There is hereby
established a nationwide Free Weather Index-based Crop Insurance (FIBCl) Program
that shall operate under the following policy framework:

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

4.1.1 An agreed weather reference index, such as, but not limited to
rainfall (mm), wind speed (kilometers per hour) and temperature
(degrees) whose quantification is provided for each Reference Unit Area
and for which data is monitored, reported and certified by an
independent third-party service provider such as PAGASA or any DOST-
ASTI recognized private professional meteorological information service
providers.

4.1.2 A Reference Weather Station as the named meteorological station
from which the observed weather parameter shall be obtained;

4.1.3 A trigger reference point for the agreed index parameter;


4.1.4 A payout or lump sum insurance payment amount that shall be
based on a pre-determined schedule that takes into account the actual
area planted.

4.4.5 Phases of crop growth that will be covered by the insurance —
which may refer to a separate trigger and partial payout for each phase
of vegetative growth, or a threshold indicator for one whole cropping or
growing period.

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

4.3 Stakeholders and Participants. The main beneficiaries of the FIBCI
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 as a group policy through accredited insurance providers. As may be
deemed necessary by the LGUs, local funds may be set aside 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 FIBCI 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 FIBC! Program
Management Office (PMO), under the Office of the Insurance Commissioner, 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
FIBCI-PMO shall:

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

b. Establish and maintain, a Weather Risk Data Center for index-based agriculture
insurance, which information may be obtained from various sources, including
PAGASA, Philippine Crop Insurance Corporation records, Project NOAH,
agriculture colleges and universities, other government research institutions,
and commercial sources such as satellite-based weather monitoring services;

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

d. Accept the participation of national and region-based insurance providers or
insurance pools and intermediaries such as brokers, and insurance agents and
meteorological information support professionals - that are
registered/accredited with the Insurance Commission to develop and register
insurance products based on actuarially sound insurance and re-insurance
principles and science and evidenced-based weather analysis.

e. Coordinate with the municipalities and cities and farmers’ cooperative
federations that are eligible to undertake the FIBCI Program in order to facilitate
their access, registration and participation to the FIBCI Program as a group
insurance facility.

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


g. Oversee, monitor and ensure compliance by the relevant parties in the

implementation of the Program and the provisions of the index-based insurance

and re-insurance contracts.

‘An Executive Director shall be appointed to formulate the agency's organization

plan, strategic and operational plans, and annual budgets which shall exceed 2% of
the total Premium Subsidies to be allotted for the fiscal year.

Section 6. FIBCI Oversight Board. The PMO shall adhere to the Micro-Agri Policy
Framework adopted by the Insurance Commission. An Oversight Board shall convene

at least twice a year to monitor and oversee the operation of the FIBCI 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:

1.

2.
3.
4,
5.
6.

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)

. Philippine Atmospheric Geophysical Astronomical Services Administration

(PAGASA)

. DOST-ASTI

. 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.

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;

b. Formulate 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;

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 FIBCI 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 FIBCI 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, through its Unified Meteorological Information System, and relevant
research institutions, the Project NOAH of DOST-ASTI, and relevant state universities,
shall continue to conduct and publish correlation and other scientific studies, prepare
computerized analytical systems, and accessible weather information, and analysis of
future climate scenarios, among others.

Pursuant to Sections 10 and 11 of R.A. 10692, PAGASA may partner with
relevant scientific organizations, research organizations and/or the 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 partner with
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
FIBCI-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, Project NOAH facilities and other
monitored public or privately-owned weather sensors.

Section 8. Role of Local Government Units. The FIBCI Program shall be
implemented by city and municipal LGUs for the farmers and farm crops within their
areas of jurisdiction. The LGU shall conduct an education and information campaign
regarding the FIBCI program as a group or community crop insurance facility and
conduct information and education campaign 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, and be provided with a policy contract for the free weather index crop
insurance, indicating the 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 shall electronically collate the farmers’
registration information and provide the PMO a report on the average cost of
production for the on-going year for the particular crop covered, to be electronically
submitted to the Provincial Agriculturist and the PMO at least 20 days prior to the start
of the planting season. The provincial agriculturists shall submit their expected
cropping calendar for the covered crops in the various municipalities and agriculture-
based cities in their respective provinces.

Section 9. Free Premium and Source of Funding. To subsidize the free premiums
of farmers under the FIBCI Program, the amount of P5.8 billion shall beset aside from
their current year’s Risk Management Fund to form the initial FIBC! Premium Subsidy
Fund. This fund shall be included as an additional line item in subsequent annual


national appropriations, as part of the Climate Change adaptation and disaster risk
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 registered
farmers shall be securely transmitted electronically to the selected insurance provider
based upon the submission of the list of registered farmers by the LGUs and/or CDA-
accredited cooperative federations to the PMO; Provided that the premium amount for
the insurance coverage will not exceed six percent (6%) of the average cost of crop
production, as certified by the city or municipal agriculturist for the on-going production
year.

The insurance service providers shall immediately submit reports to the
concerned LGU and the FIBCI-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 10. Index-Based Risk Mitigation Fund. There is hereby created an Index-
Based Risk Mitigation Fund to be managed by the PMO. Any and all unutilized
amounts under the FIBCI program for any given year shall accrue to this Fund and
may be used to further enhance index-based insurance in the country such as any of,
but not limited to, the following purposes: institution and capacity building, information
and education campaigns, the enhancement and updating of the data analytics center,
and improvement of communication and coordination between and among the key
stakeholders, especially the small farmers.

Section 11. Tax Exemptions. All premium payments paid for index-based insurance
contracts registered with the LGUs and coordinated with the PMO shall be exempt
from VAT and other relevant transaction taxes, including Documentary Stamp Taxes.

Section 12. Transitory Provisions. Initially, the FIBCI Program may commence for
rice and corn in Reference Unit Areas where weather and crop-correlation data may


have been compiled and where the insurance and re-insurance providers may offer
their weather index-based crop insurance service.

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 and crop-correlation data and
other needed studies to widen the coverage of weather index-based insurance to other
agricultural crops and livestock.

Section 13. Penalty Clause — For the areas and communities that the FIBCI-PMO
declares as eligible under the FIBCI Program, the elected LGU officials, key
administrative officers, including but not limited to the Municipal/City Agricutturist,
Treasurer, and Accountant shall be administratively liable for non-implementation of
the weather index insurance for their farmers, subject to Chapter 7 Sections47 and 48
of the Administrative Code (E.O. 292), as amended, and Rule XI (Penalties) under the
Code of Conduct and Ethical Standards for Public Officials and Employees, (R.A. No.
6713).

Section 14. Repealing Clause. All laws, executive orders, rules and regulations, or
parts thereof, inconsistent herewith are hereby repealed or modified accordingly.

Section 15. Implementing Rules and Regulations. Within sixty days from the
effectivity of this Act, the Insurance Commissioner shall convene the FIBCI Oversight
Board to formulate and adopt the Implementing Rules and Regulations of this Act
within the ensuing period of three months. The IC shall provide secretariat support to
the Board

Section 16. 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 17. Effectivity. - This Act shall take effect upon its publication in the Official
Gazette.