Bill proposes improvements to ensure the predictability and effectiveness of rural insurance, a crucial protective bulwark for producers and the industry’s economic stability
Rural insurance is not only as a sign of protection for producers, but also of certainty for a whole chain of industries and trades, and for the very economy of cities dependent on farming. However, the lack of a more robust legal framework has always been alarming, given that the operationalization of the Rural Insurance Premium Subsidy Program (PSR) faces significant challenges that limit its effectiveness, such as the inconsistency of funds allocated to the program.
While the budget of the Agricultural Activity Guarantee Program (Proagro) covers Official Loans, thus being protected as a mandatory expense, the funds allocated to PSR have always been vulnerable to blocking and cuts. This leads to an unpredictability that compromises the federal government’s subsidy capacity: last year, just over 70,000 producers¹ were served, a tiny fraction if we take the universe of 5 million² rural producers into consideration, as revealed by the Agricultural Census of the Brazilian Institute of Geography and Statistics (IBGE).
The lack of predictability directly impacts the financial health of farmers that, without proper insurance protection, need to renegotiate their debts, impairing future investments, and innovation through precision agriculture.
The Commission on Constitution, Justice and Citizenship is currently processing Bill 2951/2024³ , which proposes measures to improve the legal frameworks of rural insurance, amending Law 8171/1991, which provides for agricultural policy; Law 10823, of December 19, 2003, which deals with the economic subsidy to the Rural Insurance premium; and Ancillary Law 137, of August 26, 2010, which enables the Federal Government to participate in a fund for the supplementary coverage of rural insurance risks. In addition, it revokes provisions of Ancillary Law 137, of August 26, 2010.
With the participation of public and private members, the creation of a Private Rural Insurance Fund emerges as a way to guarantee the constant inflow of funds and to meet extraordinary demands – a more than welcome instrument, given the damage caused by the La Niña and El Niño phenomena that simultaneously impact more than one agricultural region in Brazil. There is also a bill intended to streamline the Catastrophe Fund, established by Ancillary Law 137 of 2010, which includes the removal of tax barriers and the expansion of possibilities for the Federal Government to contribute funds.
For the 17 insurers that are currently qualified to operate in the program, Bill 2951/2024 brings new features, such as the mandatory participation of insurers and reinsurers in the fund for access to PSR, and the requirement of thorough information from rural producers, an important step towards improving pricing and risk management. The adoption of Insurance Risk Notes (LRS) for the fund’s management is also expected to improve efficiency.
A stable and predictable regulatory environment is even more necessary. Budget predictability and assurance of funds are capital for insurers to be able to plan, and provide suitable products to producers.
As agriculture is one of the core industries for the Brazilian economy, accounting for 30% of the overall GDP increase in 2023, according to data from Getúlio Vargas Foundation (FGV)4, rural insurance is regarded as a pillar for certainty and sustainability – not only of agribusiness, but of domestic economic performance at large. The improvement of legal framework, as proposed in the Bill, marks an important awakening by ensuring producer protection and the supply of attractive products by the insurance market.
– By Gaya Schneider, partner at Ernesto Borges Advogados law firm, and President of the Special Commission on Insurance Law of OAB Nacional (National Brazilian Bar Association).
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¹ BRASIL. Ministério da Agricultura, Pecuária e Abastecimento. Relatório Geral do Programa de Subvenção ao Prêmio do Seguro Rural (PSR) 2023. Brasília, 2023. Available at: https://www.gov.br/agricultura/pt-br/assuntos/riscos-seguro/seguro-rural/dados/relatorios/RelatorioGeralPSR2023.pdf
² BRASIL. Ministério da Agricultura, Pecuária e Abastecimento. No Dia do Produtor Rural, Ministério da Agricultura celebra 161 anos de história. Brasília, 2021. Available at: https://www.gov.br/agricultura/pt-br/assuntos/noticias/no-dia-do-produtor-rural-ministerio-da-agricultura-celebra-161-anos-de-historia
³ SENADO FEDERAL. Projeto de Lei 164777. Brasília, 2023. Available at: https://www25.senado.leg.br/web/atividade/materias/-/materia/164777
4 Agro empurra PIB brasileiro, que cresce 3% em 2023, diz prévia da FGV. Canal Rural. Available at: https://www.canalrural.com.br/agricultura/agro-empurra-pib-brasileiro-que-cresce-3-em-2023-diz-previa-da-fgv/.
Autor: Gaya Lehn Schneider Paulino • email: gaya@ernestoborges.com.br • Tel.: +55 67 3389 0123
