Bill 2.951/2024, which reforms Rural Insurance in Brazil, is in its final stages of processing and could be voted on by the Federal Senate in the first week of August. Despite the advances foreseen in the proposal, experts believe that the approval of the text should be accompanied by other measures, such as budgetary predictability, integration of risk management policies and the development of products suited to the different realities of Brazilian agriculture. One of the proposals presented by the Center for Agribusiness Studies of the Getulio Vargas Foundation (FGV Agro) is the structuring of Rural Insurance in four layers. The model was detailed this Tuesday (14), in Brasília, during the event “The Rural Insurance that Brazil needs”, promoted by FGV Agro and Meridiana, a political intelligence think tank. Coordinator of the Rural Credit and Insurance Observatory of FGV Agro, Pedro Loyola explained that the proposal was developed from the analysis of models adopted in countries such as the United States, Spain and France. “We are in the ICU of agricultural policy. And how do we solve this? By making better use of public resources and creating something that Brazil doesn't yet have: an agricultural risk management system,” he stated. According to Loyola, the tiered system would allow for better use of public and private resources allocated to protecting agricultural activity. The system would also seek to balance responsibilities between producers, insurers, and the government, making insurance more attractive and sustainable. The model would be divided as follows: Tier 1 – Prevention: losses of up to 20% would be considered part of the activity's planning and would be the responsibility of the producer, who would manage these risks through good management practices, technologies, and recommendations from agricultural research; Tier 2 – Risks transferable to insurers: would include losses between 20% and 50%, covered by the private sector through the contracting of insurance policies; Tier 3 – National Solidarity: would be intended for losses exceeding 50%, with state support through a national solidarity fund; Layer 4 – Catastrophe Funds: This would function as a reinforcement for cases of losses exceeding 50%, with large-scale coverage and extreme weather events. This layer would include the Catastrophe Fund, made possible by Bill 2,951/2024. Loyola also noted that the current agricultural policy model already considers debt renegotiations as a recurring response to losses faced by producers. According to him, this strategy can be four to five times more expensive than prioritizing Rural Insurance. “From 1995 to the present day, every year there has been some measure to renegotiate debt, whether regional, national, or a resolution to correct something that was done in the previous year,” he stated. For the Confederation of Agriculture and Livestock of Brazil (CNA), changes to the model are positive, but they must consider the diversity of Brazilian agricultural production and offer products adapted to different crops, regions, and producer profiles. The entity also believes that adherence should not occur through mandatory measures. “The best way to convince producers is with positive incentives, not punitive ones. If we offer advantages, such as differentiated rates or some benefit in granting credit for those who take out insurance, the uptake will certainly be much greater than with a top-down imposition,” stated the technical director of CNA, Bruno Lucchi.
Budgetary predictability is a priority.
The budgetary issue was also discussed at the event. According to Fábio Damasceno, vice-president of the Rural Insurance Commission of the National Federation of General Insurance (FenSeg), the most urgent needs are the replenishment and predictability of resources. Between budget freezes, contingencies, and liabilities from 2025, the resources available for the Rural Insurance Program (PSR) fell from R$ 1.01 billion budgeted to R$ 473.8 million. He stated that budgetary instability represents an additional risk for insurers and could raise the price of policies for rural producers. "This is reflected in the policy rate and causes a concentration of risk, because the increase in the rate leads to a selection precisely in the riskiest areas," he explained.
Therefore, he divided the solution into three temporal perspectives:
Short term: replenishment of resources and predictability; medium term: approval and execution of the Rural Insurance bill, which would provide a kind of cushion for the sector and also impact credit conditions; long term: working on organizing databases to bring more technicality to insurance companies' decisions, in addition to unifying risk management and projects, such as the Agricultural Zoning of Climatic Risk (ZARC) Management Levels.
Return on invested resources
The General Coordinator of Agricultural Risk at the Ministry of Agriculture and Livestock (Mapa), Hugo Rodrigues, highlighted that, despite the reduction in the insured area in recent years, one of the strategies to strengthen the program is to demonstrate to the government the efficiency of the resources applied to the PSR (Rural Insurance Program). “In 2024, when R$ 1.07 billion was applied to the subsidy program, we had R$ 51 billion in insured value. This means that, on average, each R$ 1 applied to the PSR generated R$ 48 in insured value in the field. Perhaps this is a good indicator to show the government the importance of applying resources to the subsidy and guaranteeing a well-insured harvest,” he stated. Rodrigues also declared that the Ministry of Agriculture is aligned with the content of Bill 2,951/2024. He cautioned, however, that the possibility of vetoes involves decisions from other ministries. "The Ministry of Agriculture strongly supports the proposal. As a sectoral ministry, we know that there are cross-cutting ministries that could generate some complications. We will work to ensure that there are no vetoes," he concluded.
This text was translated by machine from Brazilian Portuguese.