Govt makes huge increase in agri-insurance subsidies

Brazil's federal government has increased insurance subsidies for agricultural producers to 60.9mn reais (US$28.2mn) for the 2006-07 harvest from 2.3mn reais for the previous one, the agricultural ministry said in a statement. The government initially set aside 42.6mn reais for insurance subsidies which it planned to release by July. "There are some products in Brazil that always remain a promise and agricultural insurance is one of them," insurance analyst and consultant Francisco Galiza told BNamericas when asked if the government subsidies program would attract more insurers to the sector. "It's a shame it won't reach its full potential, but any initiative is valid," he said of government efforts to increase agricultural coverage through local and foreign insurers. The agricultural ministry has authorized local insurers Seguradora Brasileira Rural (SBR) and Aliança do Brasil as well as the local unit of Spain's Mapfre to begin selling the subsidized policies. Federal bank Banco do Brasil ( BB) controls 70% of Aliança do Brasil, while local insurer SulAmérica holds the remaining 30%. AGF Seguros, the local unit of German insurer Allianz (NYSE: AZ), and local insurer Nobre Seguros are slated to receive permission to offer subsidized coverage within the next few days, the statement said. Although the government had budgeted 10mn reais for insurance subsidies for the 2005-06 harvest, only 2.3mn reais was made available. Insurance regulator Susep held up the approval of policies insurers could offer and federal reinsurer IRB-Brasil Re prolonged negotiations for reinsurance contracts, not allowing the ministry to release funding before November last year, the statement said.