Subsidy on Rural Insurance Premiums in Brazil

January 2013 - Interview with Luiz Antonio Corrêa da Silva, Director of the Rural Risk Management Department, Office of Agricultural Policy, Brazilian Ministry of Agriculture, Livestock and Food Supply, conducted at the time of the Agro Latin America Workshop, which was sponsored by Swiss Re in September 2012.

Are the agricultural-risk and risk-management solutions that are offered today by the insurance and reinsurance industry well known in Brazil? What is the insurance penetration?

Insurance penetration in Brazil is far below the needs of the Brazilian market, given its size and importance in the world. However, I would say that insurance has a way to go before it becomes a mature and consolidated market, and we are on the path for this to happen. We are neither very far behind nor very advanced. Today about 15 percent of the cultivated area is covered by insurance, equivalent to some seven million ha. Our goal is to reach 30%, but that takes time.

Sometimes we hear comparisons between Brazil and other countries, such as the United States, Canada, and Spain, which have consolidated insurance markets. In my view, these comparisons are not relevant because, if you look at history, these countries had to travel a long road to reach their current position. That is the road that we are now traveling.


Luiz Antonio Corrêa da Silva
Director of the Rural Risk Management Department

The outlook for Brazil's agricultural insurance market is very good, especially after the government implemented the premium-subsidy program, which has made it possible for insurance to become more widespread and also has provided a strong stimulus to the market. However, insurance coverage is still not sufficiently widespread. We have received feedback indicating that rural producers are not familiar with the types of coverage, with the conditions for coverage or with the government's program.

Hence, this has served as a lesson, both at the private level and in terms of the government, which is that we need to promote, together with industry leaders, the dissemination of information on these programs and their benefits. We need to show producers that the cost of insurance must be part of their production costs, just as car insurance is part of their family budget.

Rural producers also have a lesson to learn, which is the need to better manage their business expenses. This is just beginning to be done in Brazil. Only a few niche producers do this rigorously, while others know only how to produce but do not know how to either market their products or manage their expenses.

What is the government's view of the Rural Insurance Premium Subsidy Program that you were referring to?

First, I must say that, for the government, that program is an agricultural policy tool. Hence, just as there is a credit policy and a marketing policy, there is a policy on insurance. As part of its policy vis-à-vis insurance, Brazil created the subsidy program with a view to ensuring the development of the market. The subsidy program consists of public resources that make it possible to lower insurance premiums for rural producers.

Brazil, as we know, is highly diversified in terms of its climate and types of crops, and for this reason the subsidy program aims to have different approaches in response to these differences. Consequently, the program is constantly being improved, and the program that we have through 2015 consists of implementing differentiated programs for the various regions and producer niches in Brazil, taking into account climatic vulnerability as well as economic issues.

For example, there are regions in which agricultural and livestock activity provides an economic stimulus, and, hence, it is important for the government to support that activity in order to avoid harming the overall economy. For this reason, the subsidy program for those regions must be diversified. It must provide incentives to encourage a nearly 100 percent insurance-adoption rate.

The work that we are carrying out at the Ministry has the following aims: to build a matrix that will allow us to see the importance of the activity in the different regions, from both a social standpoint, that is, the number of producers involved, and from the standpoint of economic, technological, and other conditions, and to work with the program differently, and at times more intensively, in some regions.

However, make no mistake: we are not saying that insurance is important in one region and not in another. Insurance is important in all regions. Now, the subsidy program must provide an incentive, with greater emphasis on some regions in which the most important considerations are not only food production but also the economy overall as well as social issues.

And have you now mapped those regions, or is that work still being done?

We have mapped some factors, for example, economic and climatic-vulnerability factors. However, in conjunction with Embrapa – Brazilian Agricultural Research Corporation, we are incorporating other factors, such as credit, social factors, logistics and marketing, in order to construct a matrix. That work is being carried out in stages, and we intend for it to be completely finished by 2015. But by 2013, we will implement some of these measures, just as we have done regarding the harvest this year.

In this harvest, we selected some of the priority regions for corn, soy, beans and rice, solely from an economic standpoint— because we have not fully developed the tool — and we have now established a differentiated subsidy program for those areas. The reason for this is that these are areas where we want insurance adoption to be more widespread, because of the economic importance of the crops in these regions. In fact, on the Ministry's website you may find this information and see the municipalities in question (

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