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Outline of Agriculture Disaster Compensation System in JapanFull-length paper
2016-07-04
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Yoshihito Yasuda

National Agricultural Insurance Association

e-mail: yoshihitoy@nosai.or.jp

ABSTRACT

Agriculture is an industry affected most by nature. Japan is situated in the Asian monsoon zone. Japanese farmers suffer from heavy damages caused by frequent typhoons, floods, cold summers and other meteorological events. To establish continuity of agriculture and a stable food supply, Japanese government has set up Agricultural Insurance Scheme in 1947.The scheme is the principal countermeasure against natural disasters in Japan. We have insurance programs for rice, wheat, barley, fruit, fruit-tree, potato, bean, sugar cane, onion, livestock, and greenhouse and so on. Agricultural Mutual Relief (AMR) Associations runs insurance programs. The government provides financial assistance (subsidy), pays a certain portion of premium (about half of premium).The government subsidizes about four hundred million dollars as a part of administrative cost, and five hundred million dollars as a part of premium. President of AMR appoint some farmers to partner. They serve as an insurance person and loss assessor. They work voluntary, and AMRs support their acct. AMR is established by local farmers. Prefectural Federation of AMR supports AMRs. Municipal governments supervise AMR. The national government supervises Prefectural AMR. Prefectural AMR provides reinsurance to AMRs. The government provides re-reinsurance to Prefectural AMR.

Keywords: Agricultural Insurance Scheme, insurance programs, AMR, reinsure program

Introduction

In order to stabilize the management of damaged farmers and to contribute to the development of agricultural production, the government provides financial support by establishing “Agricultural Disaster Compensation System” with an insurance mechanism as one of the most important countermeasures to agricultural disaster.  The current system has been established in 1947 by integrating “Agricultural Insurance System” (established in1938) and “Livestock Insurance System” (established in 1929). After this system was established, it has been revised many times to cope with changes in Japanese agricultural circumstances so as to contribute to stabilization of farm management.

Section 1 – Distinguishing feature of Agricultural Disaster Compensation System:

Agricultural Disaster Compensation System is the public insurance system implemented as the Government’s agricultural disaster policy. The mechanism of this system is that, from the viewpoint of giving aid to damaged farmers in a rational manner, the farmers establish a mutual aid association in each region and pay the premium to create the communal reserve asset; then, when disaster occurs, the mutual aid money is paid to damaged farmers from that communal reserve asset. This system is based on voluntary mutual aid among farmers and the risk is dispersed across the whole country by an insurance system.

For these reasons as above, Agricultural Disaster Compensation System has characteristics as follows.

(1) Government reinsures against Farm Products Mutual Aid, Livestock Mutual Aid, Fruit-trees Mutual Aid, Field Crops Mutual Aid and Gardening Facilities Mutual Aid.

(2) Farm Products Mutual Aid and Livestock Mutual Aid shall be essential program items.

(3) In Farm Products Mutual Aid, farmers with a certain size or above shall become a member as a matter of course.

(4) Government bears part of the mutual aid premium to be paid by farmers as well as the office expenses of a body that operates Agricultural Mutual Aid Programs.

(5) The Agricultural Disaster Compensation System is run in 3 phases; namely, Agricultural Mutual Aid Association (or municipal governments), Federation of Agricultural Mutual Aid Association and the Government.

Section 2 –   Kinds of Programs implemented by Agricultural Disaster Compensation System and Purposes of Mutual Aid

Kinds of activities and the purposes of the mutual aid are as follows.

(Note)

1. Farm Products Mutual Aid Program and Livestock Mutual Aid Program are required to implement in principle (as indispensable programs). Other program can be implemented in accordance with actual conditions of regions. (Note)

2. In fruit-tree Mutual Aid Program, there are two kinds of programs; one is Harvest Mutual Aid aiming at damage of fruits and another is Tree Form Mutual Aid aiming at damage of a body of a tree.

3. Designated oranges are the generic term of Hassaku orange, Ponkan orange, Navel orange, shaddock, Tankan orange, Sanbokan sour orange, Kiyomi orange, Hyuganatsu orange, Seminole orange, Shiranuhi orange, juicy orange, Yuzu orange and Harumi orange.

4. Specified gardening facilities mean, among the gardening facilities, what are shown below:

Facilities, in which farm products are cultivated, such as a green house, and the like.

  Facilities to prevent inhibition of growth of farm products caused by meteorological factors.

5. Facultative Mutual Aid Program is what is operated voluntarily by Agricultural Mutual Aid Association and Federation of Agricultural Mutual Aid Association.

Section 3 – Organization of Agriculture Disaster Compensation System

As shown in the following figure, Agriculture Disaster Compensation System is operated in 3 phases; namely, Agricultural Mutual Aid Association (sometimes this is implemented by municipal governments (hereinafter collectively referred to as Association, Etc.), Federation of Agricultural Disaster Mutual Aid Association (hereinafter referred to as Federation) and the Government (Special Account for Reinsurance of Agricultural Mutual Aid).

First, Association, Etc. implements jobs that is connected directly to farmers such as collecting premium for the mutual aid from farmers, paying mutual aid money to damaged farmers and the like. Association, Etc. is responsible to payment of the mutual aid money to farmers (mutual aid liabilities).

In preparation for a case where a large disaster occurs and payment of the mutual aid money becomes too huge to pay only by Association, Etc., Association, Etc. can cover part of its mutual aid liabilities by insuring them to Federation, which is the phase of prefecture and city governments; then, the Federation can also cover part of its responsibility (insurance liabilities) by reinsuring it to the Government, which is the nationwide phase, to disperse the risk in wider regions so that the mutual aid money to farmers can be paid without any trouble.

(Note) As a rule, Agriculture Disaster Compensation System is operated in 3 phases as mentioned above; however, depending on the interest of the regions, it can be operated in 2 phases (Agricultural Mutual Aid Association based on the prefectural and city governments (hereinafter referred to as Specific Association) and the Government).

Section 4 – Farm Products Mutual Aid Program

  1. Purpose of the mutual aid:

      Paddy rice, dry-land rice and oats

  1. Mutual aid incidents:

      Wind and flood damage, drought disaster, cool summer damage, snow damage and other disasters brought about by meteorological causes (including earthquake and eruption), yield decrease of farm products (in the case of Quality Method of paddy rice and Disaster Income Mutual Aid Method’ of oats, yield decrease of paddy rice and oats or decrease in amount of money coming from production along with deterioration of quality) caused by fire, disease and insect damage and animal & bird damage.

      (Note) As to the paddy rice, there is a method, in which disease and insect damage is not regarded as the mutual aid incidents.

  1. Participation:

      One, who has the cultivated land of paddy rice, dry-land rice and oats, of which total area under cultivation is more than what is specified by Association, Etc. and, at the same time, has its address in the area of Association, Etc., can join this program as a qualified member of Association, Etc. or has qualification as a qualified person for Farm Products Mutual Aid. [The lower limit of the area under cultivation provided by Association, Etc. shall be 10a (in the case of Hokkaido, it shall be 30a)].

      However, the one, who has cultivated land, of which area under cultivation for each mutual aid purpose by kinds of program is within the range shown in the following table and exceeds the standard of area provided by prefectural and city governments, shall join this program as a matter of course.

      By the way, in addition to the respective farmers (individual or corporate body), an agricultural production body, which has satisfied certain requirements, can also join the program as a unit of the production body.

  1. Types of Undertaking:

      There are two types of undertaking methods; (i) a method aiming at the damage for each parcel of land and (ii) a method aiming at the damage of each farmer. Amount of mutual aid money, premium for the mutual aid and the amount of mutual aid money to be paid vary according to which method the one has joined to.

      In addition, as to undertaking methods, Association, Etc. shall provide in the mutual aid regulations, etc. that the farmer can select multiple undertaking methods; e.g. as to Parcel of Land Method and Half Setoff Method, the respective farmers can select these methods. As to Entire Setoff Method, Quality Method and Disaster Income Mutual Aid Method, only the farmer, whose crop yields (and the production amount) can be grasped correctly by delivery data, etc., can select these methods.

  1. Mutual Aid Liabilities Period:
  1.  Paddy rice:

     Period of time: from transplantation to a rice field (in the case of direct plantation, germinating period) to the harvest season.

  1. Dry-land rice / Oats:

     Period of time: from germinating period to the harvest season.

  1. Mutual Aid Amount:

It is set up as follows by undertaking methods.

  1. Parcel of Land Method:

      (Amount of mutual aid per unit (kg)) x (70% (60% / 50%) of Standard Crop Yields of Cultivated Land)

  1. Half Setoff Method:

      (Amount of mutual aid per unit (kg)) x (80% (70% / 60%) of Standard Crop Yields of Cultivated Land)

  1. Entire Setoff Farmer Unit Undertaking Method:

      (Amount of mutual aid per unit (kg)) x (90% (80% / 70%) of Standard Crop Yields of Cultivated Land)

  1. Quality Method and Disaster Income Mutual Aid Method:

      This is the amount requested by farmers within the range nothing less than the amount achieved by multiplying the lowest rate (it is decided by Association, Etc. within the range of 40% ~ 60%) with the standard production amount and not exceeding the amount achieved by multiplying compensation rate (the rate selected by farmers from among 90%, 80% and 70%) with the standard production amount; these amount shall be decided for each kind of mutual aid purpose and for each farmer.

  1. Mutual Aid Premium:

      (Amount of Mutual Aid Premium) = (Mutual Aid Amount) x (Mutual Aid Premium Rate)

(Note)

Mutual aid premium rate is set up by Association, Etc. within the range nothing less than the standard mutual aid premium rate, which is decided by the Minister of Agriculture, Forestry and Fisheries based on the damage ratio in certain period of time in the past (as a rule, it shall be 20 years).

Mutual aid premium rate is set up for each area of Association, Etc., however, it is also possible to set up the mutual aid premium rate graded by levels of danger, corresponding to the damage rate in the said area or farmers.

Generally, the standard mutual aid premium rate is revised every 3 years.

  1. State contribution to mutual aid premium:

      Regarding the mutual aid premium, the national treasury shall bear approximately 1/2 of the amount achieved by multiplying the standard mutual aid premium rate with the mutual aid amount.

  1. Prevention of the damage:

Farmers are obliged to manage the mutual aid purpose normally and also to strive to prevent the damage as much as possible. Association, Etc. shall give farmers instructions on prevention of the damage; at the same time, it can run damage prevention operation by itself.

  1. Notification of occurrence of the damage:

When any mutual aid incident occurs or when a farmer recognizes that there is damage that is to be the subject of payment of the mutual aid money, the farmer shall notify the event to Association, Etc.

  1. Evaluation of the damage:

Upon receipt of the notification of occurrence of the damage from the farmer, the damage shall be evaluated based on Damage Accreditation Rules provided by the Minister of Agriculture, Forestry and Fisheries.

  1. Association, Etc.

Association, Etc. shall implement field investigation according to the following manners and after completion of the field investigation, it shall accredit the mutual aid yield decrease quantity (or yield decrease quantity and decreased in the production amount) by cultivated land and by farmers by hearing the opinion of Damage Evaluation Committee.

  1. Parcel of Land Method / Half Setoff Method:

For all cultivated land, with which damage occurrence notification has been issued, before harvest of the crop, crop yields shall be checked by annual crop inspection method or by actual measurement method.

  1. Entire Setoff Method:

For all farmers, from whom damage occurrence notifications have been issued, crop yields shall be checked by the measurement results at the drying and preparing facilities (for the cultivated land, where the yields are not sent to the drying and preparing facilities, check shall be made by annual crop inspection method or by actual measurement method). For oats, it is possible to check by the sold-out quantity.

  1. Quality  Method  of  Paddy  Rice  &  Disaster  Income  Mutual  Aid Method of Oats:

For all farmers, from whom damage occurrence notifications have been issued, yields, degree of quality and production amount shall be investigated by means of delivery data of the agricultural cooperative association, etc. (in the case of the cultivated land, from which the yields are not delivered to the agricultural cooperative association, etc., check shall be made by actual measurement method).

(b) Federation of Agriculture Mutual Aid Association (Federation)

In  order to  give  official  approval  to  the  results  of  accreditation  by

  1. Mutual Aid Money:
  1. Payment amount of mutual aid money:

      Parcel of Land Method, Half Setoff Method and Entire Setoff Method: For  each  variety  of  mutual  aid  purpose,  corresponding  to  the ‘Percentage at Start of Payment’, the mutual aid money calculated by the following method shall be paid respectively to the cultivated land and farmers in such manner as; (i) in the case of Parcel of Land Method, mutual aid money is paid to the cultivated land, with which yield decrease has reached more than 30% (40% / 50%); (ii) in the case of Half Setoff Method, mutual aid money is paid to the farmers, of which yield decrease has reached more than 20% (30% / 40%); and

      (iii) in the case of Entire Setoff Method, mutual aid money is paid to the farmers, of which yield decrease has reached 10% (20% / 30%).

      (Payment Amount of Mutual Aid Money) = (Mutual Aid Amount per Unit) x (Mutual Aid Yield Decrease Quantity)

      Mutual aid yield decrease quantity is calculated by the following formula. However, mutual aid yield decrease quantity in the cultivated land, where the plant cannot germinate or cannot be transplanted, is calculated, considering the actual amount of the damage, as 1/2 of the mutual aid yield decrease quantity in the case of total loss in said cultivated land.

  1. Parcel of Land Method:

      (Mutual Aid Yield Decrease Quantity) = [(Standard Crop Yields in the Damaged Cultivated Land) – (Crop Yields in the Damaged Cultivated Land)] – [(Standard Crop Yield in the Damaged Cultivated Land) x 30% (40% / 50%)]

  1. Half Setoff Method:

      (Mutual Aid Yield Decrease Quantity) = [(Total of the Standard Crop Yields related to the Damaged Cultivated Land) – (Total of Crop Yields related to the Damaged Cultivated Land)] – [(Standard Crop Yields of Farmers) x 20% (30% / 40%)]

  1. Entire Setoff Method:

      (Mutual Aid Yield Decrease Quantity) = [(Standard Crop Yields of Farmers) – (Crop Yields of Farmers)] – [(Standard Crop Yields of Farmers) x 10% (20% / 30%)]

 (b) Quality Method for Paddy Rice and Disaster Income Mutual Aid Method for Oats:

      To the farmers, whose actual crop yields taking into consideration the quality of the crop by varieties of mutual aid purposes have under-run the standard crop yields and, at the same time, production amount did not reach Mutual Aid Limit for Specific Farm Products, the mutual aid money calculated by the following calculation method shall be paid.

      (Payment Amount of Mutual Aid Money) = [(Mutual Aid Limit for Specific Farm Products) – (Production Amount)] x [(Mutual Aid Amount) / (Mutual Limit for Specific Farm Products)]

      (Mutual Aid Limit for Specific Farm Products) = (Standard Production Amount) x 90% (80% / 70%)

  1. Share of Liabilities by Association, Etc., Federation and Government:

        In the mutual aid amount of each Association, Etc., responsibility for the portion below the normal  standard damage ratio (usual disaster portion) shall be shared by Association, Etc. and Federation according to percentage they are sharing, for the portion exceeding the normal standard damage ratio (abnormal disaster portion) shall be insured to Federation and for the portion exceeding abnormal standard damage ratio by Federation shall be reinsured to the Government.

Section 5 – Livestock Mutual Aid Program

  1. Purpose of the mutual aid:
  1. Cows:

      As a rule, they shall be what have passed the last day of the 5th month after birth. As an option of Association, Etc., it is possible to make calves as well as the unborn baby, which have passed more than 240 days after fertilization, etc. as the target.

  1. Horses:

      As a rule, they shall be what have passed the last day of the year of their birth.

  1. Hogs for breeding:

      They shall be what have passed the last day of the 5th month after birth.

  1. Hogs for fattening:

     They shall be those that have passed 20th day after birth (those that have not weaned from breast on that day, it shall be the day when they have weaned from breast; the same shall be applied hereafter) to, as a rule, the last day of the 8th month.

  1. Mutual aid incidents:
  1. Cows (including calves), horses and hogs for breeding:

      Death [excluding the death by slaughter and that cause the payment of allowance stipulated in the Domestic Animal Infectious Diseases Control Law (1951 Law No.166) (hereinafter referred to as DAIDC Law) Article 58, Clause 1 (restricted to the portion related to Item No.4), special allowance stipulated in the same Article, Clause 2 or compensation stipulated in the same Law, Article 60-2, Clause 1 (hereinafter referred to as Allowance, Etc.), the same shall be applied hereafter], diseases and injuries.

  1. Unborn baby of cows and hogs for fattening, Death

(3) Types of Undertaking:

  1. Mutual Aid Premium Period:

      Mutual aid premium period is 1 year from the date when the payment of mutual aid premium is received (however, in the case of Undertaking Method by a Unit of Group for hogs for fattening, this period shall be from the 20th date after birth to the last day of the 8th month after birth).

  1. Mutual Aid Amount:

      Mutual aid amount shall be what is proposed by farmers within the range from the amount achieved by multiplying the lowest percentage [this is determined by Association, Etc. within the range 20% ~ 40% (in the case of hogs for fattening, it is 40% ~ 60%)] with mutual aid price to that achieved by multiplying 80% with the mutual aid price.

      (Mutual Aid Price) x (Lowest Percentage) <= (Mutual Aid Amount) <= (Mutual Aid Price) x 80%

  1. Mutual Aid Premium:

       (Amount of Mutual Aid Premium) = (Mutual Aid Amount) x (Mutual Aid Premium Rate)

  1. State contribution to the mutual aid premium:

      Regarding the mutual aid premium, the national treasury shall bear 1/2 (in the case of hogs, it shall be 2/5) of the amount achieved by multiplying the standard mutual aid premium rate with mutual aid amount (it shall be limited to the amount set up by the Minister of Agriculture, Forestry and Fisheries).

  1. Mutual Aid Money: Death incidents:

      Within the range of annual payment limit, which is set up for each variety of target livestock of Comprehensive Mutual Aid, amount achieved by the following calculation or net damage amount, whichever comes smaller, shall be paid as Mutual Aid Money.

  1. (Payment Amount of Mutual Aid Money) = [(Price of damaged livestock (unborn baby)) – (Price of remaining materials such as inner bark, assessed price of disused livestock, compensation money, etc.)] x Mutual Aid Money/Mutual Aid Price
  2. (Net damaged amount) = (Price of damaged livestock) – [(Price of remaining materials such as inner bark or assessed price of disused livestock) + (Allowance) + (Compensation money, etc.)]

      By the way, payment limit shall not be applied to the incident caused by fire, communicable diseases (legal communicable diseases and reported communicable diseases) and natural disaster.

  1. Mutual Aid Money: Disease and injury incidents:
  1. Comprehensive Mutual Aid:

      Medical examination expenses (excluding cost of first consultation) for disease and injury shall be paid within the range of annual payment limit, which is set up for each variety of target livestock of Comprehensive Mutual Aid.

  1. Individual Mutual Aid:

      Medical examination expenses (excluding cost of first consultation) for disease and injury shall be paid within the annual payment limit, which is set up for each 1 head of livestock.

  1. Share of Liabilities by Association, Etc., Federation and Government:

         Among the mutual aid money, as a rule, Association, Etc., Federation and Government shall bear according to their percentage, 20%, 30% and 50%, respectively.

         By the way, in the regions, where Association, Etc. or Federation establishes a domestic animal clinic, among damage caused by disease and injury incidents, the portion corresponding to medical and technical services shall be reserved in the said Association, Etc. or Federation; then, the portion other than what was mentioned above shall be shared by percentage as mentioned above, respectively.

            Association, Etc. can make its sharing portion of responsibility 10% or 30%. In this case, the Government shall have responsibility of 60% or 40%.

CONCLUSION

Agriculture Disaster Compensation System in Japan was established in 1947. Then, according to the change of agriculture situation, it has been revised many times. However, the basic mechanism has been maintained. These 70 years, agricultural policy has been dramatically changed. The system is consistently supporting farmer’s management and a regional economy. Thanks to the many farmers volunteers activity.

Participation in the Trance-Pacific Partnership, globalization, the aging of farmers, such as the global food crunch. Japanese agriculture will reach the aspect that has not been experienced in the past. In clause 1 of the Agriculture Disaster Compensation Law, it is written as "ensures stable agricultural management. And contribute to productivity development of agriculture."

Agriculture Disaster Compensation System will now also, while continue to change with the times, will protect its spirit.

 

Submitted as a country paper for the FFTC-RDA International Seminar on Implementing and Improving Crop Natural Disaster Insurance Program, June 14-16, 2016, Jeonju, Korea

 

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