The government of the Philippines is said to be looking at sources of reinsurance capital to underpin the Philippine Crop Insurance Corporation (PCIC) scheme, while parametric triggers are also being explored to make the coverage more widely available and responsive.
Artemis understands that there is a desire to make the Philippine Crop Insurance Corporation (PCIC) scheme more resilient to losses and to protect taxpayers from having to shoulder any costs after particularly bad years for the countries crops.
Recently, outgoing Finance Secretary Carlos Dominguez III put the PCIC under the supervision of the Insurance Commission (IC), in response to challenges it has faced.
This move came after a World Bank study found that the PCIC lacked reinsurance protection and was exposed to catastrophic losses that could have challenged its finances.
In addition, the report also concluded that the PCIC was providing little value to taxpayers and the insurance protection it was providing to farmers was also deemed inadequate.
The PCIC has been propped up through premium subsidies from the Philippines government, but at the same time its crop insurance products have only reached around one-third of their potential audience.
At the same time, the indemnity based crop insurance product was deemed suited to larger agricultural growers and farms, but not suited to the majority of Philippines agricultural community of smallholder and subsistence farmers.
We’re told that the Philippines Insurance Commission is now exploring how to secure reinsurance to support the PCIC, a move that could also reduce the need for premium support from the government’s finances.
This is likely to come through the government’s existing reinsurance procurement routes, which have seen it buy catastrophe cover for a range of state infrastructure and facilities over the years.
Of course, the Philippines also has a catastrophe bond that is still partially in-force, having paid out some of its principal after 2021’s typhoon Rai.
Should the Philippines seek to renew its catastrophe bond, it is possible the country could seek to cover some of the risk from the PCIC under that capital markets arrangement.
At the same time as shoring up the PCIC finances, the Philippines Insurance Commission is looking at other recommendations around creating a parametric crop insurance product.
Index insurance solutions are thought to be a good way to expand the PCIC’s coverage to support the needs of smallholders and subsistence farming communities.
The indemnity crop covers would remain for more commercial farmers and agricultural growers.
The Philippines continues to advance its risk transfer and the global reinsurance and ILS markets continue to support its need for capacity.