Republic of the Philippines Te ec hh oe
HOUSE OF REPRESENTATIVES! 5 BECK 5 0 O25
Quezon City, Metro Manila upTt: VAG 2

NINETEENTH CONGRESS
1 Regular Session

House Bill No,_315,

Introduced by Representative ERIC GO YAP

EXPLANATORY NOTE

Geographically, Philippines is one of the most prone countries to natural and climate-

change-induced disasters and calamities. As the Representative of the lone district of

Benguet whose majority of the province's source of livelihood is agriculture, I have
witnessed the effects of climate change to our farmers and their agricultural lands.
There is an increasing vulnerability among our farmers given that their agricultural
lands become highly exposed to the wide range of impacts of this global phenomenon.
The current increase in commodity prices including fertilizers, other farming,
compounds, and equipment and the loss of their agricultural produce and revenue
due to this global phenomenon serve as a double whammy to the local farmers whose

majority already fall below the poverty line.

Farmers serve as the backbone of our country. Without them, our country will shut
into famish. This is for the fact that farmers feed not only their families through their
produce but the entire nation as well. Unfortunately, the support and assistance and
support they are receiving are not commensurate to their vital contribution to the
country’s food security. Until now, they remain as one of the poorest sectors in the

society.

Benguet which is known as the “Salad Bowl of the Philippines” for being the center of

vegetable production in the country. As the representative of the province, I believe


that this measure will provide security to the livelihood of our local farmers, as well

as to the food supply of the country,
This bill sccks to institute measures providing for weather index-based insurance
service to farmers. This shall facilitate their prompt recovery from the impact of

weather events leading to uncompensated losses, financial burden, and unpaid debts.

In view of the foregoing, approval of this bill is earnestly sought.

IC GO YAP



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

NINETEENTH CONGRESS
1* Regular Session

315

House Bill No.

Introduced by Representative ERIC G. YAP

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 AGRICULTURAL 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 2020.”

SEC. 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 often 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.”

In order to reach out and serve the greatest number Filipino farmers 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 agricultural

insurance programs.


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

a) lusurance — 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 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.

b) Agricultural 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.

©) Instirance 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

dl) Weather Index-based Insurance (WIBI) — is an innovative insurance product
t the incidence of extreme

that aims to provide prompt insurance payout agair
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.

f) Triggers — threshold measurement points for the selected weather
parameter indicator at which the insurance contract starts to pay out.

g) Reference Unit Area (RUA) — 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).

hy Reference Weather Station (RWS) — a specified meteorological station for
cach insurance contract as the named reference station from which the observed

weather parameter/s shall be principally obtained. This may be a particular 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 international re-insurance providers.

i) Weather index risk analysts or weather calculator agents — are information
in meteorological, climatological and/or

support professionals who specialize
weather sciences, providing expert scientific studies, technical information,
computer models and/or 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 stations.

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

SEC. 4. Free Index-Based Agriculture Insurance Framework. — There is
hereby established a nationwide Free Weather Index-based Agricultural Insurance
(FIBAD) Program that shalll operate under the following policy framework:

4.1 Weather Index-Based Insurance Product. The typical core features of an
index-based insurance product shall be present in an agricultural 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
qualification is provided for each Reference Unit Area and for which data is
monitored, reported and validated by an independent third party weather
information service provider such as PAGASA or DOST-ASTI, IC-registered
professional weather information services using and maintaining automatic
weather stations, or any satellite-based observation service recognized by

international re-insurance providers.

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

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


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

4.1.5 Phase 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,
ora threshold indicator for one whole cropping or growing period.

4.2 Insurance Service Providers. The FIBAI 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 FIBAI
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 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 parameter 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.

SEC. 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-Bascd
Agricultural Insurance. The FIBAI-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 FIBAL
program based on the rules and guidelines formulated by the FIBAI Oversight
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, records of the Philippine Crop Insurance Corporation, DOST-
ASTI’s Project NOAH, UP-Los Baios’ Project SARAL, agriculture colleges and
universities, other government research institutions, and commercial sources such

as satellite-based weather monitoring services;

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

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

¢) Coordinate with the municipalities and cities and farmers’ cooperative
federations that are cligible to undertake the FIBAI Program in order to facilitate
their access, registration and participation to the FIBAL Program as insurance
clients/ beneficiaries.

f) Undertake, in partnership with the scientific communities, the
development and conduct of relevant 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 following guidelines issued by the Insurance
Commission.

The PMO shall be headed by the Executive Director, to be appointed by the
President, who shall formulate the agency's organization structure, strategic and
operational plans, and annual budgets which shall not exceed 2% of the total
premium subsidies to be allotted for each fiscal year for approval and endorsement
by the FIBAI Oversight Board. he PMO shall ensure adherence to the Micro-Agri
Policy Framework adopted by the Insurance Commission

SEC. 6. FIBAI Oversight Board. — An Oversight Board shall convene at least
twice a year to monitor and oversce the operation of the FIBAI 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. Insurance Commission, to serve as Chairman,

2. Department of Agriculture


3, Department of Interior and Local Government
4. Cooperative Development Authority

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

7. 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

8. 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 development, managed, and
monitored by the PMO, with the end in view of ensuring proper and transparent
implementation of the Program with the widest possible outreach for small farmers;

b) Confirm the rules and guidelines for the implementation and monitoring
of index-based agricultural 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 budget of the
FIBAL and other related programs; and

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

SEC. 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 RA 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
institutions in state universities, shall continue to conduct and publish relevant
weather damage and crop yield correction research and other scientific studies,


prepare computerized analytical systems, and accessible weather information
analysis of future climate scenarios, among othe:

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
\cr with or subscribe to recognized satellite-based weather information service
g the weather

P

agencies as their alternative source and basis for determi
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.

SEC. 8. Role of Local Government Units. —The FIBAI 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 FIBAL
Program as a group or community insurance facility and 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 turn, the LGU shalll distribute the appropriate sub-policy
contracts to the beneficiary farmers for their respective free weather index
agricultural insurance, indicating the name of the farmer and 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 and the insurance provider shall
electronically collate the farmers’ insurance information and submit these to
FIBAO-PMO at least 20 days prior to the start of the planting season.

SEC. 9. Free Premium and Source Funding, —To subsidize the free premiums
of farmers under the FIBA] Program, the amount of Six Billion pesos (P6.0 billion)
shalll 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 FIBAI Premium Subsidy Fund. Henceforth, this


FIBAI Premium Subsidy Fund shall be included as an additional line item in
subsequent annual national appropriations, as a separate component of 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 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 the
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 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
concerned 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.

SEC. 10. Climate Risk Mitigation Fund for Small Farmers. — There is hereby
created a Climate Risk Mitigation Fund for Small Farmers to be managed by the
FIBAL-PMO. Any and all unutilized amounts under the FIBAT program for any
given year shall accrue to this Fund and may be used to further enhance index-
based agricultural 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
analysts centers, and improvement of communication and coordination between
and among the key stakeholders, especially the small farmers.

SEC 11. Exemption from the Procurement Law (RA 9184). —The
procurement of weather index-based agricultural insurance services under this Act
shall be exempt from the coverage of Republic Act of 9184, provided, that:

a) The insurance provider is comprised of a pool of insurance companies
formed as a joint venture with capitalization that it at least equal to the amount of
premium to be collected;

b) The insurance to be procured is a group of insurance policy from a
composite set of farmer clients within a municipality or a set of barangays;


) The insured farmers 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

¢) 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.

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 RA 9184, provided that their professional fees shall not exceed 6% of

the insurance premium.

SEC, 12. 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.

SEC. 13. 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.

SEC. 14, 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, Municipality/City Administrator,
Municipality/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.O. 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, (RA 6713).


SEC. 15. Transitory Provisions —The FIBAI Program shall initially cover the
staple crops, namely: rice and corn farms, in the Top 30 rice and com producing
provinces of the preceding year based on 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 the insurance
providers may be able to coordinate.

Within a period of five ycars 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.

SEC. 16. Implementing Rules and Regulations. —Within sixty days from the
effectivity of this Act, the Insurance Commissioner shall convene the FIBAL
Oversight Board and 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.

SEC. 17. Separability Clause. —If any portion of provision of this Act is
declared unconstitutional or invalid, the remainder of this Act or any provisions
hereof not affected thereby shall continue to be in force and effect.

SEC. 18. Repealing Clause. —Any law, presidential decree or issuance,
executive order, letter of instruction, rule of regulation inconsistent or contrary to
the provisions of this Act is hereby repealed or modified accordingly.

SEC. 19. Effectivity. —This Act shall take effect after fifteen (15) days
following its publication in the Official Gazette or a newspaper of general circulation.

Approved,

10