IFC partnered with CARD Pioneer Microinsurance Incorporated (CPMI) in the Philippines to design and launch a new crop-insurance product to protect farmers from typhoon-related losses. It will initially target CARD’s farmer clients. CARD is the Philippines’ largest micro-finance institution with four million clients.
“This is the first private sector-led crop-insurance product in the Philippines and a ground-breaking initiative by our partners CPMI and CARD,” said country manager Yuan Xu.
The agriculture sector contributes approximately 11 percent of the country’s GDP and provides employment for over one-third of its 40 million workforce. According to the 2016 World Risk Report, the Philippines is the third most vulnerable country for disaster risks, facing an average of 20 typhoons a year. The most powerful of recent typhoons, Yolanda, struck in November 2013, damaging crops, property, buildings, and infrastructure worth Philippine pesos 361 billion ($7.5 billion).
Insurance Commissioner Emmanuel Dooc welcomed this innovative new product, which he said “will uplift the lives of farmers (who) are the most vulnerable when typhoons hit.” Lack of appropriate risk-management measures in the market discourages agricultural investment, further hindering economic growth. Poverty levels among farmers are three times higher than those in other sectors.
The crop insurance will be bundled with loans, and paid out to rice and corn farmers after a declared typhoon event. It will cover 40,000 farmers and facilitate an additional $8 million in financing in the first year. “With 2,200 branches across the Philippines, CARD can penetrate areas that are hard to reach. Our plan is to cover up to one million clients in the next five years,” said CARD Chairman Aristotle Alip.
Hopefully the initiative will stimulate growth of what is a difficult and challenging market. “Traditionally, insurance companies have catered to the A, B, and corporate markets, with no one willing to serve the mass market. We want to reach the unserved market while keeping a sustainable business model,” said Lorenzo Chan, President of Pioneer Life Insurance.
IFC will continue to work with CPMI on other innovations to expand their market, including designing an index-based portfolio insurance product to protect institutions lending to farmers against typhoon risk. “Our vision is that this program will be available to other financial institutions and distributors in the agriculture sector,” said Geric Laude, CEO of CARD Pioneer.
The initiative is supported by the Government of Canada and the Japanese government, a key donor to the Global Index Insurance Facility, a multi-donor trust fund managed by IFC and jointly implemented with the World Bank. Other donors include the European Union and the Netherlands. The facility’s objective is to expand the use of index insurance as a risk-management tool in agriculture, food security, and disaster risk reduction.