Revelando Incentivos

The report compares the Proagro and PSR rural insurance programs in Brazil, finding that Proagro's design—where the government assumes risk while financial institutions operate the program—creates significant information asymmetries and moral hazard. This leads to higher claim rates and increasing costs for the National Treasury. In contrast, the PSR, where private insurers bear the risk, shows greater efficiency and growth, though it struggles to reach small-scale producers. The authors recommend migrating resources toward the PSR, improving claim verification through technology and training, and integrating sustainable farming criteria into risk zoning to enhance the sustainability of Brazilian agriculture.

• 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. Between 2013 and 2021, PSR policies increased from 102,600 to 213,800, and the insured value rose from R$ 22.4 billion to R$ 67 billion. During the same period, Proagro contracts fell from 466,900 to 284,300, although its insured value remained stable at approximately R$ 17 billion.
• Proagro suffers from more severe information asymmetries and moral hazard than the PSR because the Union assumes the insurance risks while financial institutions handle operations. This structure reduces incentives for institutions to monitor producers and for producers to prevent crop losses, potentially leading to overestimated claims and fraud.
• The differing incentive structures result in higher claim rates and higher effective coverage in Proagro 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 in Proagro Mais and Proagro Tradicional, respectively, but only 5.4% in the PSR.
• Proagro's high claim rates have led to a sharp increase in costs for the Brazilian government. Between 2017 and 2021, expenditures on Proagro indemnities quadrupled, rising from R$ 1.3 billion to R$ 5.8 billion, outstripping the program's revenue growth.
• Both programs are highly concentrated in a few crops, with soy, corn, and wheat representing approximately 80% of the insured value. Soy is the dominant crop in both, accounting for 57% of the insured value in the PSR and 34% in Proagro.
• While the PSR is more efficient in risk management, it faces challenges in reaching small-scale producers, who are primarily served by Proagro. A 2020 pilot project for operations under Pronaf indicated 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} }