SEVENTEENTH CONGRESS OF )
THE REPUBLIC OF THE PHILIPPINES )

Second Regular Session ) 18 MAR20 P457

SENATE Bill No. 1759

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Introduced by SENATOR CYNTHIA A. VILLAR

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 WEATHER INDEX-BASED CROP INSURANCE, PROVIDING THE SOURCE OF
FUNDING THEREFOR, AND FOR OTHER PURPOSES

EXPLANATORY NOTE

The Philippines is one of the most disaster-prone and climate-change vulnerable
countries in the Asian region. Its geographic location places most of the agriculture
production areas in the direct path of most typhoons that originate in the Western Pacific.
The country is, thus, highly exposed to various hydro-meteorological hazards, including
climate-change induced super-typhoons and storm surges.

Farmers in the Philippines are the poorest among the various economic sectors, mostly
due to poor productivity and antiquated farm practices. But this is gravely exacerbated
by the high risks brought about by weather disturbances and calamities. For instance,
according to the Philippine Food Security Information System of the Philippine Statistical
Authority, floods and typhoons from the year 2000 through 2012 wreaked havoc on rice
and corn farms costing farmers up to P54.8 billion or an average of P4.2 billion per year.
The Department of Agriculture reckons a total of P106.9 billion in weather damages for
all crops for the ten year period from 2000-2010. According to the Philippine Crop
Insurance Corp. (PCIC), corn farmers alone have suffered cumulative losses of P7 billion

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over the three decades from 1982-2012 due to the many catastrophic typhoons, floods,
droughts, plant diseases and pests wreaked havoc on their crops.’

The World Bank's Global Index Insurance Facility has noted that the ‘most powerful of
recent typhoons, Yolanda, which struck in November 2013, damaged crops, property,
buildings, and infrastructure worth PhP361 billion (US$7.5 billion)” apart from thousands
of lives that were lost.2 In 2015, The Climate Change Act of 2009 (RA 9729) has called
for the design of relevant and appropriate risk-sharing and risk-transfer instruments and
coordination with local government units (LGUs) and private entities to address
vulnerability to climate change impacts of regions, provinces, cities and municipalities.
Likewise, the Philippine Disaster Risk Reduction and Management Act of 2010 (Republic
Act No. 10121) sought to have "continuing budget appropriation on disaster risk
reduction from national down to local levels towards building a disaster-resilient
nation and communities" and “to lessen the impact of disaster, and facilitate
resumption of normal social and economic activities."

An average farmer can lose up to P50,000 a year in vanished productivity due to
extreme weather events.’ But we have yet to produce a tangible response that will help
our farmers cope with climate change risks. It behooves the government, then, to
introduce more effective disaster risk management and climate-change adaptation
approaches to help farmers gain resiliency and the ability to financially recover faster,
contribute to productivity, and safeguard the country's food security.

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 has been
appropriating an average of PhP 1.55 billion per year to subsidize the PCIC insurance
premiums on up to 600,000 hectares of rice farms in a number of provinces. Still, against
a total of almost P380 billion in palay production in 20144, the Philippine Crop Insurance
Corporation has been insuring only around P12.2 Billion worth of crops annually or
roughly 3% of potential insurable value.5 In short, the greater numbers of our small

* http://www. philstar.com/headlines/2014/08/18/1358840/crop-insurance-program-shields-farmers-climate-
change
*http://documents.worldbank.org/curated/en/608151490705770748/text/113748-BRI-PH-Philippines-Nov8-
digital-PUBLIC txt
*https://www.rappler.com/move-ph/issues/hunger/52992-climate-change-food-security-ph

* www.psa.gov.ph

* Computed based on data farmers registered as derived from PCIC website.



farmers remain uninsured simply because of the inadequate resource base and outreach
of the PCIC.

To effectively reach and serve more and more of country's five million small-hold
farmers, provide them with greater resiliency, there is a need for the country to involve
the private sector and adopt a more relevant strategy and also safeguard the food
security of the broader rural population. Weather Index-based Crop Insurance (WIBCI)
has become a very popular mode of providing risk transfer on the part of millions of
farmers in a growing number of countries in Asia, Africa and Latin America.

Weather Index-based Crop Insurance is a unique insurance product based on the
occurrence of breach of a weather-based parameter, which serves as legal proof of the
occurrence of extremely adverse weather conditions and proxy for the expected crop
damage. WIBCI is an innovation that requires less administrative costs in terms of selling
the product, administering the policy coverage and monitoring over wide areas;
maximizes the use of relevant technologies and networks in order to reach out to more
and more farmers; and provides faster payout turn-around in the event of breach of the
agreed parameters without need for bureaucratic processing by an adjuster. The hassle-
free disbursement of claims is made possible through the use of technology and a widely
distributed network of payment centers.

The required elements already exist in the country but need to be organized under a
coherent policy framework and a conducive policy environment. The insurance contracts
elaborating rates, terms, and conditions requires strong collaboration among a variety of
participants including: Meteorological Agency and/or Satellite-based Weather monitoring
services; Agriculture research institutions to do correlation research studies to validate
crop sensitivity to specific weather disturbances; insurance service providers, including
the PCIC; Local Government Units; and the farmers, themselves.

Another important component of Weather Index-based Crop Insurance is the support for
re-insurance to provide a second layer of insurance support to help the originating
insurance providers in absorbing shocks from disasters and in spreading out their risks.
This enables originating insurance providers with predictable financial relief, greater
capacity to insure more and more farmer clients and strengthen societal resilience.

The country has around 5.5 million small-hold farms dispersed in the various island
groups, the majority of which are in Luzon, Mindanao, Negros and Panay Islands, the



MIMAROPA island group. Around 2.4 million farmers are into rice production, each tilling
an average of 1.14 hectares or a total rice area of 2.88 million hectares®.

The prospects of growth for the WIBCI industry should focus on enticing the players of
the insurance industry, to provide cover to more and more of the country's farmers. This
will require a policy environment that will be encourage the wider use of WIBCI as a
Policy instrument to support social safety nets, disaster resiliency, and food security.

This bill aims to institute measures needed to effectively establish the weather index-
based insurance service in the Philippines, ensure the access initially of the 2.4 million
rice farmers to an innovative risk sharing arrangement aimed at enhancing their capacity
to deal with extreme adverse weather events. The program will require around PhP 5.8
billion per year to be initially sourced from the Risk Management Fund (Unprogrammed
Appropriations) to potentially cover the FIBC! premiums for 2.8 million hectares of rice
lands.

The need to provide an immediate tangible social safety net for the Filipino farmers

cannot be over-emphasized.
Cynthia A. ie

Senator

Approval of this bill is urgently requested.

* “Rice Farming in the Philippines: Facts and Opportunities.” PowerPoint presentation by Bruce Tolentino,
IRRI. September 2015.



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SEVENTEENTH CONGRESS OF )
THE REPUBLIC OF THE PHILIPPINES ) .
Second Regular Session ) 18 MAR 21

SENATE Bill No. 1759 ECE

Introduced by SENATOR CYNTHIA A. VILLAR

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
(FIBCl) Act of 2017"

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."



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

c) 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 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 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.



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

follows:

. 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 or indicator
at which the insurance contract starts to pay out.



1 f. Reference Unit Area (RUA) - is a contiguous geographical area such as a
2 municipality or city as may be covered or monitored by a Reference Weather
3 Station (RWS).

5 g. Reference Weather Station (RWS) - a specific meteorological station for each

6 insurance contract as the named reference station from which the observed
7 weather parameter/s shall be obtained. This may be a particular weather facility of
8 the Philippine Atmospheric Geo-Physical and Astronomical Services
9 Administration (PAGASA), or a PAGASA-accredited private weather station,
10 and/or satellite-based weather observation service.

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

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

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

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23 4.1.1 An agreed weather reference index, such as, but not limited to rainfall
24 (mm), wind speed (kilometers per hour) and temperature (degrees) whose
25 quantification is provided for each Reference Unit Area and for which data
26 is monitored and reported by an independent third party service provider
27 such as PAGASA or a private professional weather information service

28 firms.



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4.1.2 A Reference Weather Station as the named meteorological station
from which the observed weather parameter shall be obtained, which may
include PAGASA's own weather stations, PAGASA-accredited automatic
weather stations (AWS), and satellite-based weather monitoring services,

among others;

4.1.3 A trigger_or threshold reference point for the agreed index
Measurement for which, upon the occurrence of a breach, the insurance

provider obligates itself to indemnify (or make a payout) to the insured;

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.

4.1.5 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 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 FIBC!
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 FIBC! program
shall be the Filipino farmers and agriculture and fisheries producers who shall
register with their respective Local Government Units (LGUs) for the particular crop

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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 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 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, which 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 FIBC! program
based on the rules and guidelines formulated by its Board;

b. Establish and maintain a Weather Risk Data Analytics Center for index-based
agriculture insurance, which information may be obtained from various sources,
including PAGASA, Philippine Crop Insurance Corporation, 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 in the country;



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d. Pre-qualify, pre-accredit, and pre-approve the participation of national and region-
based insurance providers and intermediaries such as brokers who are allowed by
the Insurance Commission to develop and register insurance products based on

actuarially sound insurance and re-insurance principles;

e. Coordinate with the municipalities and cities that are eligible to undertake the FIBC!
Program in order to facilitate their access to the Program funds that will assist their
registered farmers.

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 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.

The PMO shall be headed by an Executive Director who shall act its chief executive
officer and who shall report to the Board of Administrators. The Executive Director shall
formulate the agency's organization plan, strategic and operational plans, and annual
budgets to be submitted, with approval by the Board, to the OP and the Department of
Budget and Management.

Section 6. FIBC/ Board of Administrators. The PMO shall be governed by a Boardof
Administrators to be composed of the heads of the following institutions and agencies, or

their designated permanent representatives:

1. Insurance Commission, to serve as Chairman

2. Department of Agriculture



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. Department of Interior and Local Government
. National Disaster Risk Reduction and Management Council (NDRRMC)

. Philippine Atmospheric Geophysical Astronomical Services Administration

(PAGASA)

. 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:

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;

. Govern, monitor and oversee the operation of the FIBC! program and oversee

the administration of all index-based agriculture insurance in the country;

. Formulate the rules and guidelines for the implementation of index-based crop

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

insurance principles;

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

. Prepare, through the PMO, an annual report on the implementation and extent

of availment by farmers and LGUs of the FIBCI program.



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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.

Through its Unified Meteorological Information System, PAGASA shall, in
coordination with the relevant research institutions, continue to conduct and publish
correlation and other scientific studies relative to weather and Philippine crops and
livestock, computation of evapo-transpiration, and analysis of future climate scenarios,
among others.

PAGASA shall calibrate and accredit in accordance with its specifications and
standards all automatic weather stations (AWS) to be installed in the country and shall be
responsible for monitoring and regulation of the standards and maintenance of all
PAGASA-accredited AWS.

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, or to complement the data from
PAGASA. 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.



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Section8. Role of Local Government Units. The FIBC! 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 FIBC!
program and distribute information materials with the help of their barangay officials. The
farmers shall formally register with the Municipal or City Agriculturist, at least 45 days prior
to the start of crop planting, to avail of 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 FIBC! Program, the amount of P5.8 billion shall be set aside from their
current year's Un-programmed Risk Management Fund to form the FIBCI Premium
Subsidy Fund. This fund shall be included as an additional line item in subsequent annual
national appropriations, 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.



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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 list of registered farmers reported by the LGUs to the PMO; Provided that the premium
amount for the insurance coverage will not exceed five percent (5%) of the average cost
of crop production, as certified by the city or municipal agriculturist for the on-going
production year.

The farmers may directly choose their insurance service providers from among
those accredited by the FIBCI-PMO and communicated to farmers by the LGUs. 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 for
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. |nitially, the FIBC! Program may commence
for rice and corn in Reference Unit Areas where weather and crop-correlation data may

coe



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

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

Section13. Penalty Clause — For the areas and communities that the FIBCI-PMO
declares as eligible under the FIBC! Program, the elected LGU officials, key administrative
Officers, including but not limited to the Municipal/City Agriculturist, 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.0. 292), as amended, and Rule XI (Penalties) under the Code of Conduct and
Ethical Standards for Public Officials and Employees, (R.A. No. 6713).

Section14. Repealing Clause. All |aws, 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 FIBC! Board of
Administrators to formulate the Implementing Rules and Regulations of this Act within the
ensuing period of three months.

Section 16. Separability Clause - The provision 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.

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

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