Crop Insurance as a Risk Management Strategy in Bangladesh

3.11.2 Canadian Experience
Crop insurance in Canada dates back to 1939 when the federal government started to provide
disaster assistance to grain producers on the prairies. Since then, a tripartite system has
evolved that consist of three separate programs: Crop Insurance (CI), the Net Income
Stabilization Account (NISA), and the Agricultural Income Disaster Assistance (AIDA). The
programs are administered at the level of provincial governments and no private insurance
companies are involved. The Federal government sets general frameworks and shares
program costs with provincial governments, but the latter have flexibility to modify the
products to suit the specific needs of farmers in their jurisdiction. In addition, programs are
highly participatory with farmers, provincial governments, and federal government
participating in discussing surrounding product designs, rate setting, and performance
feedback.
The Crop Insurance Program (CI) providing a yield guarantee based on historical yield data
for the farm. If production falls below a yield trigger an indemnity will be paid covering 80-
90% of the difference between the trigger and realized yield. The product is multiple peril,
covering all losses due to natural hazards, excessive moisture, uncontrollable diseases, and
pests and even damage caused by protected migratory waterfowl. In 1999, 100,000 or 50% of
all farmers participated and 50 million acres where insured, constituting 55% of all crop and
forage acreage (EU, 2001). For most of the 1990s, the loss ratio was favorable, less than one,
except for 1992-93. The Federal and provincial governments each pay 25% of the total
premium and 50% of the administrative costs. The combined cost to the Federal and
provincial governments has been trending upward sharply, rising 34% from US$338 million
in 1995 to US$454 in 1999 (EU, 2001). In addition to these costs, the Federal government
has reinsurance agreements with four provinces and subsidies the reinsurance premium for
two other provinces that purchase it in the private reinsurance market.
3.11.3 Experience from Caribbean and South America
Table 3.8: Performance indicators for Central American Countries for 2004
Variable/Country El Salvador Guatemala Honduras Nicaragua
No. of countries/ Agricultural Portfolio 2 2 3 1
Premiums $793,900
No. of policies 267 2160 7
Hectares insured 2289 3242 11780 927
Penetration ratio 0.34% 0.23% 1.33% 0.09%
Indemnities/Premiums 61.49%
(Source: Etide Economique Counsel, May 2005)
3.11.4 Crop Insurance – India
Earlier attempts:
The idea of crop insurance emerged in India during the early part of the twentieth century, in
around 1920. Yet it was not operated in a big way till recent years. Crop insurance received
more attention after India’s independence in 1947. Different experiments on crop insurance
on a limited, ad-hoc and scattered scale started from 1972-73. The first crop insurance
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