Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City y

TWENTIETH CONGRESS
First Regular Session

2747

House Bill No.'

Introduced by Representative Julius Cesar “Jay” V. Vergara

EXPLANATORY NOTE

The Philippine Crop Insurance Corporation (PCIC) is a government owned and
controlled corporation created under PD 1467. It was later amended by PD 1733 and
further amended by RA 8175. It is the implementing agency of the government's
agricultural insurance program. PCIC is an attached agency of the Department of
Agriculture and its principal mandate is to provide insurance protection to farmers
against losses arising from natural calamities, plant diseases and pest infestations of
their crops.

Under RA 8175, crop insurance remains optional for self-financed farmers and
is only mandatory upon farmers obtaining production loans for palay under the
supervised credit program. Thus, with the current law, only financial institutions
remained secure and a majority of the farmers, those who obtain loans outside the
supervised credit programs or the so called self- financed farmers, are unsecured.
Moreover, other major problems have again resurfaced. Farmers are continuously
affected by disasters resulting to diminishing agricultural production and pose a
serious threat to the country's food security. For example, the National Disaster Risk
Reduction and Management Council (NDRRMC) reported that typhoon Pedring
damaged PhP937 billion worth of agricultural products and properties, while typhoon
Quiel's destruction was estimated at PhP115 million. Whereas the PCIC's preliminary
assessment showed about PhP333.93 million worth of crops were insured in 30
provinces covering the entire Luzon. The insured crops of PhP334 million only
represents 3% of the almost Php10 billion in damages from the 2 mentioned
typhoons.!

The problem with the PCIC is that it has continually failed to adequately
protect our subsistence farmers from the rigors of calamities, often paying far less than

' Expanded Crop insurance Act of 2016, HB No. 2445, 17" Congress (2016)


what the actual value of the projected harvest is. This bill seeks to amend the PCIC
Charter to require insurance payment that reflects the actual cost incurred and/or the
value of the projected harvest of our farmers. It is only by properly compensating the
farmers that will we fully protect their interest and those of their families. This s very
much needed at present and in the years to come considering the devastation brought
about by climate change which has led to stronger typhoons and more unpredictable
weather patterns.

In light of the foregoing, the immediate passage of this bill is earnestly
requested.

aged

JULIUS CESAR “JAY” V. VERGARA
Third District of Nueva Ecija


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Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

TWENTIETH CONGRESS
First Regular Session

2747

House Bill No.

Introduced by Representative Julius Cesar “Jay” V. Vergara

AN ACT STRENGTHENING THE PHILIPPINE CROP INSURANCE
CORPORATION (PCIC), REPEALING FOR THE PURPOSE PRESIDENTIAL
DECREE NO. 1476, ENTITLED “CREATING THE ‘PHILIPPINE CROP
INSURANCE CORPORATION’ PRESCRIBING ITS POWERS AND
ACTIVITIES, PROVIDING FOR ITS CAPITALIZATION AND FOR THE
REQUIRED GOVERNMENT PREMIUM SUBSIDY, AND FOR OTHER
PURPOSES,” AS AMENDED BY PRESIDENTIAL DECREE NO. 1733 AND
REPUBLIC ACT NO. 8175,

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

Section 1. Title. - this Act shall be known as the "Revised Charter of the
Philippine Crop Insurance Corporation".

Section 2. Declaration of Policy. - It is hereby declared a policy of the State to:

(a) To ensure food security, intensify food production, promote agricultural
credit, and broaden the coverage of mandatory crop insurance amidst the
recurrence of disasters and calamities, natural or otherwise, such as floods,
typhoons, heavy rains, and drought that destroys crops, especially palay
and other grains and crops necessary for food security;

(b) To alleviate the financial burden of farmers due to uncompensated losses

arising from destruction of crops wrought by disasters and calamities, keep

farmers away from indebtedness, enhance farmers' credit standing, and

provide farmers additional government support to increase agricultural

production;

To assist banks and financial institution enhancing their capabilities to

extend loans to farmers; and

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(d) To strengthen the organizational capability and to expand the coverage of
the Philippine Crop Insurance Corporation (PCIC), a government-owned
corporation established pursuant to Presidential Decree No. 1476 to
provide insurance protection to farmers against losses arising from natural
calamities, fortuitous events, plant and fish diseases, and pest infections.

Section 3. Expanded purposes and Coverage of the PCIC. - The PCIC, hereinafter
referred to as the Corporation, shall insure qualified farmers and fisherfolk against
losses arising from natural calamities, fortuitous events, plant and fish diseases, and
pest infections. It shall provide insurance coverage for palay and corn crops, high-
value commercial crops, livestock, aquaculture and fishery products, agroforestry
crops, and forest plantation; non-crop agricultural assets such as machineries,
equipment, transport facilities and other related infrastructure; and life and accident
term insurance coverage for farmers and fisherfolk. Such crop insurance shall cover,
in every case, the cost of production inputs, the value of the farmer's or fisherfolk's
own labor and members of the household including the value of the labor of hired
workers, and a portion of the projected value of the crop. Such insurance protection,
however, shall exclude losses arising from avoidable risks emanating from or due to
the negligence, malfeasance or fraud committed by the insured or any member of the
immediate farm household or employee, of the failure of the insured to follow proven
farm practices.

The Corporation shall also insure properties and facilities which are owned or
used by government agencies involved in agri-fishery-forestry projects or activities
and government-financed agri-fishery-forestry projects. It shall also provide

reinsurance coverage to agri-fishery- forestry properties and facilities underwritten by
private and government insurance companies, and weather index-based insurance
(WIBI) and reinsurance for palay and corn crops, high-value commercial crops,
livestock, aquaculture and fishery products, agroforestry crops, and forest
plantations.

Section 4. Powers. ~ The Corporation shall continue to exercise the following
powers and functions:
(a) To describe, repeal, and alter its own bylaws;
(b) To adopt and use a corporate seal;
(©) To sue and to be sued;
(d) To have continuous succession until dissolved by law;
(e) To determine its operation policies and to issue such rules and regulations
as may be necessary to implement the crop insurance scheme;
() To insure the crop of farmers and fishpond, seaweed, oyster or mussel farm
or fisherfolk against loss, damage and destruction caused by natural


calamities such as typhoons, flood, droughts, earthquakes, volcanic

eruptions, rodents, vermin, diseases, insects and other pests; and to carry

on any business necessary, related to and expedient for the above purpose;
(g) To insure in the Philippines or abroad all or any risks of the Corporation;
(h) To purchase or otherwise acquire ownership and manage any and all parts
of the business, property and liabilities of any person or company carrying
onany business which the Corporation is authorized to carry on or possess;
To acquire by purchase or otherwise acquire ownership of and to invest in,
hold, sell, or otherwise dispose of stocks or bonds or any interest in either,
or any obligation or evidence of indebtedness of any corporation, domestic
or foreign, or the bonds or other obligations or evidence of indebtedness,
of any person, firm, or corporation; and as owner of such stocks, bonds or

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interest therein, other obligations or evidence of indebtedness, to exercise
the rights, powers and privileges of ownership, including the right to vote
thereon or consent in respect thereto for any and all lawful purposes;

(j) To purchase, or otherwise acquire, sell, lease, convey, mortgage, encumber,
and otherwise deal with any property, real or personal, or any interest
therein; extend credit on the security of real state or movable property;
exercise easement right or privilege over or in respect to any property, real
or personal, as may be permitted by law and as may be
reasonable/necessary to carry out the purpose for which the Corporation
is formed or as may or hereafter be permitted by law;

(k) To establish branches whenever it may be expedient and necessary; and

()) To generate internal funds by floating bonds, expanding the Corporation's
insurance line to include agricultural guarantee loans, and extending
coverage to other areas of agriculture, such as livestock, aquaculture,
fishery, agroforestry, and forest plantation, in order to address insurance
needs of the target sector and to do and perform acts and things and to
exercise all the general powers conferred by law upon the Corporation as
are incidental or conducive to the attainment of the objectives of the
Corporation.

Section 5. Who Shall Be Insured. - Participation in the insurance for palay and
other crops essential for food security, as determined by the Department of
Agriculture (DA), shall be compulsory upon all farmers. For other crops, participation
shall be compulsory upon all farmers obtaining production loans under the
supervised credit programs, and optional on the part of self-financed farmers
provided they agree to place themselves under the supervision of agricultural
production technicians.


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The term “supervised credit program” as used in this Act shall mean the
production credit program wherein the farmer who obtained production loans agree
in writing to apply proven farm practices necessary to conserve the land, improve its
fertility and increase its production, and abide by the approved farm plan and budget
jointly prepared by such farmer and the duly accredited supervised credit technician.

The term "supervision of agricultural production technician" shall mean the
supervision undertaken by agricultural production technicians who are duly
accredited by the appropriate government agencies concerned, as required under the
supervised credit system.

Section 6. Rate of Premium, Sharing, and Amount of Indemnity. ~ The rate of
premium, as well as the allocated sharing thereof of farmers, fisherfolk, lending
institutions, the Government of the Republic of the Philippines (herein called the
Government) and other parties, shall be determined by the Board of Directors of the
Corporation: Provided, That the share of the Government in the premium cost in the
form of premium subsidy shall be limited to subsistence farmers and fisherfolk:
Provided, however, That each of these subsistence farmers is cultivating not more than
seven (7) hectares of farmlands and each fisherfolk is cultivating not more than five
(5) hectares of fishpond, seaweed, oyster, or mussel farm by themselves or with the
help of the labor of the members of their households or hired labor, the premium rate
and sharing to be determined by the Board of Directors: Provided, further, That the
premium share of the subsistence farmer or fisherfolk shall be reasonably affordable:
Provided, furthermore, That the Government shall share in the premium cost only in
insurance coverage against unforeseen and unavoidable risks such as typhoons,
droughts, rainfall, outbreak of pests and diseases: Provided, finally, That the premium
subsidy or insurance benefits shall, upon accumulation of surplus funds, be increased
to such amount as may be determined by the Board of Directors, taking into
consideration that the Corporation has been established not only for profit but mainly
to help Filipino farmers and fisherfolk.

‘The amount of indemnity shall be determined by the Board of Directors, which
shall take into account the value of the potential harvest for crops at the ripening stage
of growth; actual cost of production inputs already applied at the time of loss per farm
plan and budget, subject to limits stipulated in the policy contract; pro-rated cost of
the harvested crops; the saivage value; if any, and the percentage of yield loss.

Section 7. Premium Subsidy. —(a) The required Government premium subsidy,
as determined by the Board of Directors and approved by the President of the
Philippines, shall be deemed appropriated from the funds of the National Treasury


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not otherwise appropriated, and shall be drawn, on a month-to-month or other
periodic basis, depending upon the actual amount of insurance underwritten by the
Corporation. For this purpose, the Corporation shall bill the Government the sum of
money corresponding to the computed amount of subsidy.

(b) Yearly projections of the premium subsidy shall be submitted by the
Corporation to the President of the Philippines, and upon approval shall be included
in the Government's budgetary appropriation.

(©) Calamity funds earmarked by the Government shall include a certain
percentage for crop insurance and shall be released to and administered by the
Corporation.

(d) Ten percent (10%) of the net earnings of the Philippine Charity Sweepstakes
Office (PCSO) from its lotto operation shall be earmarked for the Crop Insurance
Program and said amount shall be directly remitted by the PCSO to the Corporation
every six (6) months until the amount of government subscription is fully paid.

Section 8. Capital Stock. ~ (a) The authorized capital stock of the Corporation
is ten billion Pesos (P10,000,000,000.00) divided into seventy-five million (75,000,000)
common shares with a par value of one hundred Pesos (P100.00) each share, which
shall be fully subscribed by the Government and twenty-five million (25,000,000)
preferred shares with a par value of one hundred Pesos (P100.00)

(b) The common capital stock of one billion five hundred million Pesos
(P1,500,000,000.00) having been fully paid to the Corporation, the balance of six billion
Pesos (P6,000,000,000.00) subscribed by the Government shall be appropriated
annually by Congress unless otherwise provided by existing laws.

(©) The preferred shares shall be entitled to a preference over common shares
in any declaration of dividends. They shall also be given priority in the distribution of
assets in the event of liquidation of the Corporation. They shall have the following
specific features:

(1) Preferred as to dividends at a minimum of one and one-half percent
(1.5%) or the prevailing three hundred sixty (360)-day Treasury bill rate
at the time of declaration of dividends, whichever is higher;

(2) Cumulative;

(3) Nonparticipating;

(4) Nonvoting;

(6) Dividends thereon shall be exempt from income tax;


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(6) Redeemable at the option of the Corporation at the prevailing book
value but in no case less than par after five (5) years from the issuance
thereof, and

(7) Transferrable.

(d) At least five hundred million Pesos (P500,000,000.00) of preferred shares
shall be subscribed and paid for by the Land Bank of the Philippines (LBP). The
balance of the preferred shares may be available for sale or to subscription by the
general public.

Section 9. Reserved Fund for Catastrophic Losses. - A state reserve fund for
catastrophic losses in the amount of five hundred million Pesos (P500,000,000.00) shall
be created exclusively to answer for the proportion of all losses in excess of risk (pure)
premium under the Corporation's Crop Insurance Program for small farmers and
fisherfolk. The Fund may be increased subject to the approval of the President of the
Philippines. The Fund shall be administered by a government financial institution to
be designated by the Corporation's Board of Directors. Such sum as may be necessary
for the purpose shall be funded by the National Government through the annual
General Appropriations Act. The mechanics of claims against the Fund and to what
extent the Fund shall be liable shall be determined jointly with the financial institution
administering the Fund, subject to the approval by the President of the Philippines.

Section 10. Reinsurance. - In order to spread the risk of the Corporation, the
PCIC is hereby authorized to seek reinsurance protection whenever it may be
available.

Section 11. Board of Directors. - (a) The powers of the Corporation shall be
vested in and exercised by a Board of Directors, hereinafter referred to as the Board,
composed of seven (7) members and made up of the following: the President of the
LBP, the President of the Corporation, the DA Secretary, a representative from the
private insurance industry to be nominated by the Secretary of Finance and three (3)
representatives from the subsistence farmers’ sector, preferably representing agrarian
reform beneficiaries/cooperatives/associations coming from Luzon, Visayas, and
Mindanao, who shall be selected and nominated by the different farmers’
organizations or cooperatives. The respective nominees of the private insurance
industry and the farmers' sector shall be submitted to and appointed by the President
of the Philippines. The chairman of the Board shall be appointed by the President of
the Philippines from among the members of the Board. The President of the
Corporation shall also be appointed by the President of the Philippines and shall be
ex officio Vice Chairman who shall assist the Chairman and act in his stead in case of


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absence or incapacity. In case of absence or incapacity of both the Chairman and the
Vice Chairman, the Board shall designate a temporary chairman from among its
members. Except for the President of the LBP and the DA Secretary, all members of
the Board, including the President of the Corporation, shall be appointed by the
President of the Philippines within a reasonable period of time after the approval of
this Act.

(b) The members of the Board shall have their respective alternates who shall
attend the meetings, and act as members of the Board in the absence or incapacity of
the regular members.

() The Board shall meet regularly at least twice a month and as often as the
exigencies of the Corporation's affairs demand. The presence of at least five (5)
members shall constitute a quorum which shall be necessary for the transaction of any
business. The Board may be convoked either by the Chairman or, in his absence, by
the Vice Chairman.

(d) The Chairman and the members of the Board shall each receive per diem
pursuant to existing law for each meeting of the Board personally attended: Provided,
however, That in the case of the representatives of subsistence farmers' sector, the Board
is authorized to determine reasonable traveling and, if necessary, subsistence
expenses in going to and returning from said Board meetings, to be disbursed to them
in addition to their per diem.

Section 12. Powers and Functions of the Board of Directors. - The Board shall have
the following powers and functions:

(a) To implement the provisions and purposes of this Act;

(b) To formulate and adopt policies and plans, and to promulgate rules and
regulations for the management, operation and conduct of the affairs and business of
the Corporation and, for this purpose, may limit or refuse insurance in any area or on
any farmer because of the risk involved or may expand the subject of insurance
coverage to crops other than palay: Provided, That such coverage on other crops shall
be approved by the President of the Philippines;

(©) To borrow funds from local and international financing sources or
institutions and issue bonds up to five (5) times the value of its authorized capital
stock for the purpose of financing the programs and projects deemed vital for the
attainment of the Corporation's goals and objectives;

(d) To enter into, make, and execute contracts of any kind or nature as may be
necessary, or incidental to the accomplishment of the purposes of the Corporation;


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(e) To approve the budget of the Corporation and to fix the reasonable
compensation of its personnel: Provided, That the Board shall have exclusive and final
authority to promote, transfer, assign or reassign personnel of the Corporation and
these personnel actions are deemed made in the interest of the service and not
disciplinary, any provision of existing law to the contrary notwithstanding;

(f) To establish policies and guidelines for employment on the basis of merit,
technical competence and moral character, and approve a staffing pattern of personnel
defining their powers and duties; and

(g) To exercise the general powers mentioned in the Corporation Law insofar
as these are not inconsistent or incompatible with the provisions of this Act.

Section 13. Management. - The management of the Corporation shall be vested
in the President of the Corporation who shall be a person of known integrity,
competence in technical and executive fields related to the purposes of this Act. The
President of the Corporation shall be appointed by the Board and shalll not be removed
except for cause. There shall also be Vice President(s) as the Board may decide, to be
appointed by the latter. The President of the Corporation shall have the following
powers and duties:

(a) To execute and administer the policies, plans and programs and the rules
and regulations approved or promulgated by the Board;

(b) To submit for the consideration of the Board such policies, plans and
programs deemed necessary to carry out the provisions and purposes of this Act;

(0) To direct and supervise the operations and internal administration of the
Corporation and, for this purpose, to delegate some or any powers and duties to
subordinate officials;

(a) To recommend to the Board the appointment, promotions, transfer,
assignment, reassignment, demotion, dismissal and compensation of personnel; and

(e) To exercise such other powers and perform such other duties as may be
directed by the Board.

Section 14. Settlement of Claims. - (a) Claims for indemnity against the
Corporation shall be settled by the Corporation's regional manager concerned or the
appropriate officer to whom the function is delegated. However, if in the opinion of
the regional manager the claim is novel, difficult, or controversial, the matter may be
elevated by the regional manager to the President of the Corporation for decision.

(b) The claimant aggrieved by the decision of the regional manager may, within
thirty (30) days from receipt of the decision, request for reconsideration thereof, and
if not satisfied therewith, may elevate the matter to the President of the Corporation.


(©) Any party aggrieved by a decision, order or ruling of the President of the
Corporation may appeal said decision, order, or ruling to the Corporation's Board.

(d) Any claim not acted upon within sixty (60) days from submission of
complete claim documents to the Corporation shall be considered approved.

Section 15. No Claim Benefits. - Any insured farmer or fisherfolk who has not
filed any claim during the immediately preceding three (3) crop seasons, or any
insured fishpond or fish cage operator who has not filed any claim during the
immediately preceding three (3) harvest seasons shall be entitled to a no-claim benefit
of at least ten percent (10%) of premium share paid for said crop seasons to be
deposited in a trust fund and to be managed by the Corporation. Such trust fund may
be used to finance premium rebate or premium credit applicable to the immediately
following crop seasons as determined by the Board of the Corporation.

Section 16. Commission on Audit. - The Commission on Audit shall be the ex
officio auditor of the Corporation.

Section 17. Legal Counsel. - The Corporation shall have its own Legal
Department, the Chief and members of which shall be appointed by the Board.

Section 18. Interagency Linkages. - (a) To support and promote the operations
of the Corporation, all government departments, bureaus, offices, agencies and
instrumentalities, national or local, all lending institutions, government or private,
now or hereafter engaged in the supervised credit program to farmers and fisherfolk
and such other public or private entities as may be called upon by the Corporation,
shall act as cooperating agencies to the Corporation and, for this purpose, are hereby
directed to design their policies, programs, rules and regulations so as to attune and
synchronize them with the objectives of the Corporation.

(b) All lending institutions granting production loans for palay, corn and other
crops under the supervised credit program of the Government shall automatically act
as underwriters for and on behalf of the Corporation. As such, they shall receive and
process applications for insurance coverage; approve those found in order and collect
premiums therefor. Premiums so collected, together with the premium payable by the
lending institution itself, shall be remitted to the Corporation in the manner and
within such period as may be prescribed by the Corporation.


Section 19. Utilization of Profits. - The profits of the Corporation shall be
determined on a calendar year basis and the manner of its distribution shall be
determined by law.

Section 20, Exemption from Taxes. - In furtherance of the effective achievement
of the purposes of this Act, the Corporation shall continue to be exempted to the extent
allowed by national policy from all national, provincial, municipal and city taxes and
assessments now enforced: Provided, That said exemption shall apply only to such
taxes and assessments for which the Corporation itself would otherwise be liable and
shall not apply to taxes and assessments payable by persons or other entities doing
business with the Corporation.

Section 21. Penal Provisions. - (a) Any person who through malfeasance,
misfeasance or nonfeasance allows a spurious claim to be paid, including the claimant
himself, shall, upon final conviction, be punished by imprisonment of not less than
three (3) years but not more than eight (8) years or a fine of not less than one hundred
thousand Pesos (P100,000.00) but not more than six hundred thousand Pesos
(P600,000.00), or both imprisonment and fine at the discretion of the court. The PCIC
personnel who allowed the commission of the offense shall, in addition, be dismissed
from office, and forfeit all privileges and benefits which may accrue to such personnel.

(b) Any person or entity granting production loan for palay under the
supervised credit program of the Government without requiring crop insurance
therefor or having collected premiums from farmers, would fail to remit the same
within the time and place specified in the rules and regulations of the Corporation
shall, upon conviction, be punished by a fine not exceeding ten thousand Pesos
(P10,000.00) or imprisonment of not exceeding six (6) months, or both, at the discretion
of court.

(0) Any person or entity who shall violate any provision of this Act or any rule
or regulation issued for its implementation, for which no penalty is provided, shall be
deemed guilty of a penal offense and, upon conviction, be punished by a fine not
exceeding five thousand Pesos (P5,000.00) or imprisonment of two (2) months, or both,
at the discretion of the court.

Whenever any violation of the provisions of this section is committed by a
corporation or association, or by a government office or entity, the executive officer or
officers of said corporation, association, or government office or entity who shall have
knowingly permitted, or failed to prevent, said violation shall be held liable as
principal.


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Section 22. Applicability of Presidential Decree No. 612, as Amended. - The
provisions of the Insurance Code insofar as they are not in conflict or inconsistent with
or repugnant to the provisions of this Act shall apply to the Corporation.

Section 23, Term of Existence and Periodic Review. ~ The Corporation's term of
legal existence, which was set to last for fifty (50) years starting from the date of
approval of Presidential Decree No. 1467 on June 11, 1978, shall continue and is hereby
affirmed. To ensure the Corporation's continuing relevance, the PCIC Board shall
undertake periodic review of the Corporation's activities and shall submit to both
Houses of Congress at least once a year a report which shall include, among others, a
recommendation for improving services to the target sectors and the financial viability
of the Corporation.

Section 24. Separability Clause. - If any provision or part hereof is held
unconstitutional or invalid, the other provisions not affected shall remain in force and
effect.

Section 25. Repealing Clause. - Presidential Decree No. 1467, Presidential
Decree No. 1733, Republic Act No. 8175, and all other laws, executive orders, and other
issuances or parts thereof inconsistent with this Act are hereby repealed or modified
accordingly.

Section 18. Effectivity. - This Act shall take effect fifteen (15) days after
completion of its publication in the Official Gazette or in at least two (2) newspapers

of general circulation.

Approved,