International pratice

Land use in Brazil

	Area
	Million ha	%
Amazon forest	360	42%
Pasture	210	25%
Yearly and perennial crops	64	8%
Cultivated forest	6	1%
Non exploited	101	12%
Cities	20	2%
Protect areas	52	6%
Others	38	4%
Total	851	100%

Rural Insurance Historical Background

Rural insurance started in Brazil in 1954 when the National Agrarian Insurance Company was founded. At the same year the Agrarian Insurance Stabilization Fund was established to provide financial assistance to farmers. This fund was reorganized into Rural Insurance Stabilization Fund in 1966. With the purpose of strengthening the farmers’ access to finance the government launched Rural Activities Guaranty Program in 1973.

Rural Activity Guarantee Program – PROAGRO

ProAgro is not a rural insurance program but the Governmental guarantee to producers of agricultural commodities. The program provides working capital to farmers however they need to have a certain portion of their own resources invested in production. The program was modified in 2005 into Proagro Plus.

Statistical information on Proagro program

	PROAGRO (a)	PROAGRO PLUS (b)	TOTAL (c)	(b)/( c) %
N°  of  Contracts (thousand)	68.2	585.2	653.4	90
Value insured (US$ billion)	1.4	2.7	4.0	66
Premium paid  (US$ million)	56	54	110	49
Indemnifications paid (US$ million)	106	164	270	61
Net public expenditures (US$ million)	52	118	170	70

Rural Insurance Legal Framework

Rural insurance in Brazil is mainly governed by the Law 10.823 adopted in 2003. This law rules that the government would provide premium support to make rural insurance cheaper to farmers. The Complementary Law 126 adopted in 2007 opened of the reinsurance market

The national government will establish a Catastrophic Fund to support rural insurance. The draft law is being prepared and should be adopted in the nearest time. The law foresees involvement of private business in the Catastrophic Fund.

Rural Insurance Modalities

Premium Subsidy is available for agricultural crops, livestock, aquaculture and forestry. The subsidies are not provided on life insurance, betterments in the property, rural mortgage and rural producer notes.

Rural Insurance Growth

	2006	2009	2010
Premium Subsidy (US$ million)	17.3	145	255.5
N° of Policies (thousand)	20.3	75	113
Capital insured (US$ billion)	1.6	5.5	17
Area covered – Ha (million)	1.6	7.0	11

The Insurance Premium Subsidy (Producer/Year)

Coverage	Subsidy %	Limit US$  1,000
Agriculture	40 to 70	53.3
Livestock	30	17.8
Forestry	30	17.8
Aquiculture	30	17.8
Maximum subsidy		106.8

Premium Subsidy distribution

Product	%
Agriculture	99.3
Soy	39.1
Maize	23.8
Wheat	18.7
Apple	4.1
Others	20
Livestock	0.3
Forestry	0.4
Total	100

RURAL INSURANCE TARGETS

Supporting development of rural insurance, the government expects to increase the coverage of cultivated area, Improve farmers’ the access to rural credit, reduce the demand for rural debit renegotiation and increase the use of new agricultural technologies.

The program will help to establish higher credit limit for insured crops. The program will be based on the partnership of central government with the state governments. It will finance the portion of the premium sum to be paid by the farmers.

Rural Insurance Challenges

The program experiences several problems including

Ø  Absence of cultural attitude in favor of rural insurance

Ø  Low number of insurers

Ø  Expand rural insurance coverage to all producing regions, and

Ø  Budgetary constraints