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

William EdwardsIowa State University

Crop Insurance in Argentina:La Dulce Cooperative

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

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

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 %

Policies, Premiums and Indemnities

•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

There are 27 ag insurance companies in Argentina.

Types of Coverage Offered

Hail and Wind48%

Hail Only49%

Multiple Peril3%

Types of Perils Covered

Hail and Wind DamageHail and Wind Damage

Crops Insured by La DulceCrops Insured by La Dulce SoybeansSoybeans Corn Corn SunflowersSunflowers WheatWheat BarleyBarley OatsOats RyeRye FlaxFlax Canary grassCanary grass PeasPeas

Setting the GuaranteeSetting the Guarantee

Producer chooses the number of Producer chooses the number of

quintals per hectare to insurequintals per hectare to insure Minimum and maximum by crop, zoneMinimum and maximum by crop, zone No production history neededNo production history needed Can choose deductible, 0% up to 40%Can choose deductible, 0% up to 40%

Setting the PremiumSetting the Premium Premiums are fixed as a percent of the Premiums are fixed as a percent of the

value of the coverage, by each companyvalue of the coverage, by each company Discounts for higher deductiblesDiscounts for higher deductibles

DeductibleDeductible Discount Discount ..

Small GrainsSmall Grains Course GrainsCourse Grains10%10% 20%20% 22%22%20%20% 34%34% 38%38%30%30% 45%45% 50%50%40%40% 52%52% 59%59%

Price is the average price at the port Price is the average price at the port during the last 10 days before:during the last 10 days before:• January 20 for small grainsJanuary 20 for small grains• May 10 for corn, soybeans, sunflowersMay 10 for corn, soybeans, sunflowers

Setting the PremiumSetting the Premium

Discount of .25% for each year Discount of .25% for each year affiliated with the cooperativeaffiliated with the cooperative

Discounts for repeat customersDiscounts for repeat customers Excess premiums are rebated to Excess premiums are rebated to

members at the end of the year or members at the end of the year or invested in the foundationinvested in the foundation

Calculating the IndemnityCalculating the Indemnity Percent damage is determined by the adjustor. Percent damage is determined by the adjustor.

Looking at using satellite photography.Looking at using satellite photography. Indemnity = production guaranteeIndemnity = production guarantee

x area insuredx area insured

x price at harvestx price at harvest

x % damage (> deductible)x % damage (> deductible) Deductible disappears as % damage increases. Deductible disappears as % damage increases.

Zero at 95% damage or higher.Zero at 95% damage or higher. Swiss and German reinsurance companiesSwiss and German reinsurance companies

Example: SoybeansExample: Soybeans

Coverage: 35 quintals/ha. (51 bu/a)Coverage: 35 quintals/ha. (51 bu/a) Price is 77 pesos/quintal ($7 / bu)Price is 77 pesos/quintal ($7 / bu) Coverage value is 2,695 P/ha ($359/a)Coverage value is 2,695 P/ha ($359/a) 20% deductible20% deductible Premium is 2.42% of coverage valuePremium is 2.42% of coverage value Premium =.0242 x 35 qtl. x 77 = 65 pPremium =.0242 x 35 qtl. x 77 = 65 p

($8.70 per acre)($8.70 per acre)

Example: SoybeansExample: Soybeans Assume hailstorm causes 50% damageAssume hailstorm causes 50% damage Deductible shrinks to 12.5%Deductible shrinks to 12.5% Payment = (50% -12.5%) = 37.5%Payment = (50% -12.5%) = 37.5%

x 2,695 P/ha = 1,011 P/hax 2,695 P/ha = 1,011 P/ha

($134.75/a)($134.75/a)

Comparison of Premiums ($ per acre)Comparison of Premiums ($ per acre)CornCorn La DulceLa Dulce SW Iowa APHSW Iowa APH

80%80% $8.48$8.48 $15.28$15.28

70%70% $6.86$6.86 $7.25$7.25

60%60% $5.64$5.64 $3.79$3.79

SoybeansSoybeans

80%80% $7.62$7.62 $9.12$9.12

70%70% $6.14$6.14 $3.80$3.80

60%60% $5.04$5.04 $1.75$1.75

WheatWheat

80%80% $5.24$5.24 $11.00$11.00

70%70% $4.38$4.38 $6.65$6.65

60%60% $3.81$3.81 $4.20$4.20

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 %

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 %

Crop Insurance Coverage by Province

Year %

1999 36,8

2002 44,9

2003 58,0

2004 52,0

Percent of Farmers Who Purchased Crop Insurance the Previous Year

58

44.9

36.8

52

0

10

20

30

40

50

60

70

Año 1999 Año 2002 Año 2003 Año 2004

Acres Farmed % who purchased insurance

TOTAL 52

Less than 500 43 From 500 to 1,500 54 More than 1,500 62

0

100.000

200.000

300.000

400.000

500.000

600.000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

Hectares insured by La Dulce Cooperative since 1970

Record Hectares Insured: 512.776 Has

0

20.000

40.000

60.000

80.000

100.000

120.000

140.000

160.000

180.000

1 2 3 4 5 6 7 8 9 1 11 1 1 1 15 1 17

Soybeans: 162.624 HasSoybeans: 162.624 Has

Sunflowers:Sunflowers:59.714 Has59.714 Has

Corn: 28.180 HasCorn: 28.180 Has

Hectares of Grains Insured

Socios Nuevos

43 38 40 46 19 2273

110

292 282 301352

92 119 108 106

300353

314

504

647

0

100

200

300

400

500

600

700

86/8

7

87/8

8

88/8

9

89/9

0

90/9

1

91/9

2

92/9

3

93/9

4

94/9

5

95/9

6

96/9

7

97/9

8

98/9

9

99/0

0

00/0

1

2001

- 2

002

2002

- 2

003

2003

- 2

004

2004

- 2

005

2005

- 2

006

2006

- 2

007

Number of New Members

Guillermo Thomas, General Manager

Use of GPS MappingUse of GPS Mapping

Silvana Roccabruna, Chief Adjustor

Other Activities of LA DULCE COOPERATIVE

Convention Center for Cultural Events and Continuing Education

Other Activities of LA DULCE COOPERATIVE

Annual Meeting and Prizes

Cruises

Vacations

Pickup

Appliances and Computers

Other Activities of LA DULCE COOPERATIVE

Cultural Foundation

Student competition for technological innovation

Town Library and Bookmobile to Smaller Communities

Foreign Foreign Experts??Experts??