Revelando Incentivos

This report by the Climate Policy Initiative (CPI/PUC-Rio) analyzes two Brazilian rural insurance programs: the Programa de Garantia da Atividade Agropecuária (Proagro) and the Programa de Subvenção ao Prêmio do Seguro Rural (PSR). It examines how the design of these policies creates different incentives for producers, experts, and financial agents, arguing that Proagro's structure leads to higher information asymmetry and lower public spending efficiency compared to the PSR.

• The PSR has experienced significant growth in both the number of policies and the total insured value, while Proagro has seen a decline in the number of contracts despite maintaining a stable insured value. Between 2013 and 2021, PSR policies increased from 102,600 to 213,800, with the insured value rising from R$ 22.4 billion to R$ 67 billion. In the same period, Proagro contracts fell from 466,900 to 284,300, with the insured value remaining around R$ 17 billion.
• Proagro suffers from more severe information asymmetry and moral hazard because the Union assumes the insurance risks while financial institutions handle the operations. This creates incentives for producers to exert less effort, experts to overstate losses, and financial institutions to overestimate claims. In contrast, the PSR shifts risk to private insurers, who are incentivized to monitor producers and select lower-risk clients.
• The incentive distortions in Proagro result in higher claim rates and higher effective coverage compared to the PSR. Between 2019 and 2021, over 28% of Proagro policies had approved claims, compared to 19% for the PSR. In terms of value, approved claims represented 22% and 18% of insured values for Proagro Mais and Proagro Tradicional, respectively, while the PSR was only 5.4%. Effective coverage (indemnity relative to the insured value of approved claims) was 68% for Proagro Mais and 61% for Proagro, versus 32% for the PSR.
• Proagro's high claim rate has led to a sharp increase in costs for the Brazilian government. Between 2017 and 2021, expenditures on indemnities quadrupled, rising from R$ 1.3 billion to R$ 5.8 billion. This growth in expenditure has outpaced the program's revenue from premiums.
• Both programs are highly concentrated in three main crops: soy, corn, and wheat, which together account for approximately 80% of the insured value. Soy is the dominant crop in both, representing 57% of the insured value in the PSR and 34% in Proagro.
• While the PSR is more efficient in risk management, it struggles to reach small-scale producers to the same extent as Proagro. A 2020 pilot project for operations under the National Program for Strengthening Family Agriculture (Pronaf) demonstrated that the PSR can effectively serve small producers.

APA

Souza, P., Pereira, L., & Stussi, M. (2022). Revelando Incentivos. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2022/07/Revelando-Incentivos.pdf

Chicago

Souza, Priscila, Leila Pereira, and Mariana Stussi. Revelando Incentivos. Climate Policy Initiative, 2022. https://www.climatepolicyinitiative.org/wp-content/uploads/2022/07/Revelando-Incentivos.pdf.

Wikipedia

{{cite report |last1=Souza |first1=Priscila |last2=Pereira |first2=Leila |last3=Stussi |first3=Mariana |title=Revelando Incentivos |publisher=Climate Policy Initiative |date=July 2022 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2022/07/Revelando-Incentivos.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{souza2022revelando, author = {Souza, Priscila and Pereira, Leila and Stussi, Mariana}, title = {{Revelando Incentivos}}, institution = {Climate Policy Initiative}, year = {2022}, month = jul, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2022/07/Revelando-Incentivos.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }