LA CROP CREDIT INSURANCE SYSTEMS

CROP INSURANCE PROGRAMS ARE DESIGNED TO REDUCE LENDING INSTITUTIONS" RISK OF EXCESSIVE DEFAULT AND TO REDUCE RISK FACED BY SMALL FARMERS WHEN ADOPTING NEW PRODUCTION TECHNOLOGY. SEMI-AUTONOMOUS CROP INSURANCE AGENCIES ATTACHED TO THE MINISTRIES OF AGRICULTURE WILL BE ESTABLISHED IN ECUADOR AND BOLIVIA, AND AN EXISTING CROP INSURANCE AGENCY IN PANAMA WILL BE STRENGTHENED. THE COMPANIES INITIALLY WILL UNDERTAKE LIMITED CROP INSURANCE ACTIVITIES ON A PILOT BASIS, AND WILL EXPAND THEIR COVERAGE GRADUALLY AS THEIR PROGRAMS PROVE SUCCESSFUL. CORE PERSONNEL FROM EACH OF THE 3 AGENCIES WILL BE TRAINED IN VARIOUS ASPECTS OF THE ADMINISTRATION OF CROP INSURANCE PROGRAMS, AND TECHNICAL ASSISTANCE WILL BE PROVIDED TO EACH OF THE AGENCIES IN MANAGEMENT AND SPECIFIC AREAS OF INSURANCE SUCH AS RATE MAKING, LOSS ADJUSTMENT AND UNDERWRITING. PROJECT ALSO INVOLVES RESEARCH ACTIVITIES IN EACH OF THE 3COUNTRIES, AS WELL AS IN MEXICO, WHICH HAS THE ONLY EXISTING SMALL FARMER ORIENTED CROP CREDIT INSURANCE PROGRAM. RESEARCH WILL FOCUS ON METHODS OF PROVIDING CROP INSURANCE, AND ON THE IMPACT OF CROP INSURANCE UPON CREDIT DEMAND AND AVAILABILITY, TECHNOLOGY ADOPTION, CROP MIXES, EMPLOYMENT AND FARMER WELFARE. A REGIONAL CROP REINSURANCE MECHANISM WILL ALSO BE EXPLORED. BENEFICIARIES WILL BE SMALL FARMERS IN THE 3 COUNTRIES. 3 HOST GOVTS INVOLVED WILL SUBSIDIZE UP TO 2/3 THE COST OF CROP INSURANCE PREMIUMS TO FARMERS AND WILL COVER ALL LOSSES INCURRED BY THE 3 INSURANCE AGENCIES WHICH ARE NOT COVERED BY THE PREMIUMS. OTHER DONORS INCLUDE IDB AND IBRD. Project amendment No. 1 of 4/15/83 extends the first stage of the project (i.e., the project as funded and managed centrally, rather than by USAID) 16 months to 12/31/84. The planned regional public sector insurer (ALARA) will not be designed. Rather a system utilizing international commercial insurers will be promoted. Also, since this is primarily an insurance (not agricultural) project, its management contract will be opened to proposals from professional insurers, reinsurers, and insurance consultants on 8/31/83 when the Interamerican Institute for Cooperation on Agriculture (IICA) contract expires. (PD-AAM-706)