Integrated financial management of climate risks in the agricultural sector in Peru
As of: August 2019
Objective and activities
The project advises the Peruvian Ministry of Agriculture (MINAGRI) on establishing a risk-transfer system with the backing of both the state and the private sector. The system will improve food security, enhance economic stability in rural areas and help the agricultural sector to better cope with climate change. The private and public financial services offered through the system will enable agricultural producers to reduce their vulnerability to weather extremes - which are exacerbated by climate change - and to limit their exposure to the associated risks. The project is supporting the development of an information system and strengthening the expertise required for the management and government supervision of risk transfer systems in Peru.
State of implementation/results
In 2015 the Ministry of Agriculture, insurance companies and the banking and insurance supervisory authorities develeped a risk transfer system that is supported by the State and the private sector. – Between 2014-2018, the area under crops that has an agricultural catastrophe insurance grew by 86%. The increase is due to improved market standard insurance conditions, premium rates and loss triggers.
- In 2017, the Ministry of Agriculture established the Department of Finance and Agricultural Insurance.
- Together with the Ministry of Agriculture, a draft for a law for agricultural insurance was developed that creates a uniform legal framework for all agricultural insurance policies that receive state subsidies.
- The Ministry of Agriculture, the insurance companies and the Banking and Insurance Supervisory Authority created a stable public-private partnership as part of which a bimonthly public-private dialogue forum was established.
- A monthly Agricultural Insurance Committee was formed with representatives of agricultural insurance companies. The committee develops joint initiatives and represents the interests of the companies with the goal to strengthen their participation in the market.
- In order to improve data collection in the agricultural sector, a more cost-effective and precise method for determining agricultural land was developed with the Ministry of Agriculture and applied in piloted in three regions
- In order to anchor the use of the method in the long term, experts from various institutions were trained to use the new method. The National Statistics Institute plans to use this method in the next agricultural survey. The National Agricultural University intends to use the new method in research.
Exchange of experiences in Latin America was created at several events, i.a.at the events "On the safe path to risk management in the agricultural sector" and "Agricultural insurance for financial integration: progress and challenges up to 2021" organised by the Ministry of Agriculture. The events promoted the development of innovative approaches for agricultural insurances and risk transfer systems.