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William Edwards Iowa State University

Crop Insurance in Argentina: La Dulce Cooperative. William Edwards Iowa State University. 85 years of serving the farmers of Buenos Aires Province in Argentina. Brief History of Agricultural Insurance in Argentina Early: Spooking of horses pulling carriages Early: Theft of livestock

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William Edwards Iowa State University

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  1. Crop Insurance in Argentina: La Dulce Cooperative William Edwards Iowa State University

  2. 85 years of serving the farmers of Buenos Aires Province in Argentina

  3. Brief History of Agricultural Insurance in Argentina Early: Spooking of horses pulling carriages Early: Theft of livestock 1953: Significant increase in insuring crop losses 1992: Reinsurance coverage 1998: Multiple peril insurance 2000: Office of Agricultural Risk (ORA) created 2004: First national survey of agricultural insurance

  4. Policies, Premiums and Indemnities Argentina (2004) USA (2004) Policies sold 100,325 1,228,796 Premiums paid $107 million $4,186 million Acres insured 26 million 221 million Premium per acre $4.18 $18.94 (total) Indemnities paid $53.6 million $3,207 million Indemnity paid per acre $2.06 /acre $14.51 Payback ratio 50 % 77 %

  5. Types of Coverage Offered There are 27 ag insurance companies in Argentina. • 22 covered hail damage. • 18 covered additional causes of damage such as wind, frost, excess rain. • 7 offered multiple peril coverage. • 3 offered livestock risk coverage (production) • No revenue insurance

  6. Types of Perils Covered

  7. Hail and Wind Damage

  8. Crops Insured by La Dulce • Soybeans • Corn • Sunflowers • Wheat • Barley • Oats • Rye • Flax • Canary grass • Peas

  9. Setting the Guarantee • Producer chooses the number of quintals per hectare to insure • Minimum and maximum by crop, zone • No production history needed • Can choose deductible, 0% up to 40%

  10. Setting the Premium • Premiums are fixed as a percent of the value of the coverage, by each company • Discounts for higher deductibles Deductible Discount . Small Grains Course Grains 10% 20% 22% 20% 34% 38% 30% 45% 50% 40% 52% 59% • Price is the average price at the port during the last 10 days before: • January 20 for small grains • May 10 for corn, soybeans, sunflowers

  11. Setting the Premium • Discount of .25% for each year affiliated with the cooperative • Discounts for repeat customers • Excess premiums are rebated to members at the end of the year or invested in the foundation

  12. Calculating the Indemnity • Percent damage is determined by the adjustor. Looking at using satellite photography. • Indemnity = production guarantee x area insured x price at harvest x % damage (> deductible) • Deductible disappears as % damage increases. Zero at 95% damage or higher. • Swiss and German reinsurance companies

  13. Example: Soybeans • Coverage: 35 quintals/ha. (51 bu/a) • Price is 77 pesos/quintal ($7 / bu) • Coverage value is 2,695 P/ha ($359/a) • 20% deductible • Premium is 2.42% of coverage value • Premium =.0242 x 35 qtl. x 77 = 65 p ($8.70 per acre)

  14. Example: Soybeans • Assume hailstorm causes 50% damage • Deductible shrinks to 12.5% • Payment = (50% -12.5%) = 37.5% x 2,695 P/ha = 1,011 P/ha ($134.75/a)

  15. Comparison of Premiums ($ per acre)

  16. Market Share in Argentina (by value insured) 1. Sancor Coop. 22 % 2. Segunda Coop. 23 % 3. San Cristóbal Coop. 8 % 4. Federal Patronal 6 % 5. Mapfre Argentina 6 % 5. Zurich SA 6 % 12. La Dulce 2 %

  17. Crop Insurance Coverage by Province Province Premiums Indemnities Hectares Capital Insured Córdoba 33 % 37 % 28 % 25 % Buenos Aires 32 % 30 % 39 % 38 % Santa Fe 19 % 13 % 18 % 21 % Entre Ríos 5 % 3 % 7 % 8 % Jujuy 4 % 8 % 0 % 2 % La Pampa 3 % 5 % 4 % 2 % Resto 4 % 4 % 4 % 4 %

  18. Percent of Farmers Who Purchased Crop Insurance the Previous Year Year % 1999 36,8 2002 44,9 2003 58,0 2004 52,0 Acres Farmed % who purchased insurance TOTAL 52 Less than 500 43 From 500 to 1,500 54 More than 1,500 62

  19. Hectares insured by La Dulce Cooperative since 1970 Record Hectares Insured: 512.776 Has

  20. Hectares of Grains Insured

  21. Number of New Members

  22. Guillermo Thomas, General Manager

  23. Use of GPS Mapping

  24. SilvanaRoccabruna, Chief Adjustor

  25. Other Activities of LA DULCE COOPERATIVE Convention Center for Cultural Events and Continuing Education

  26. Other Activities of LA DULCE COOPERATIVE Annual Meeting and Prizes Cruises Vacations Pickup Appliances and Computers

  27. Other Activities of LA DULCE COOPERATIVE Town Library and Bookmobile to Smaller Communities Cultural Foundation Student competition for technological innovation

  28. Foreign Experts??

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