Skip navigation
Share via:


Modelling an Agricultural Insurance Program against floods risk of the Southern Maracaibo Lake affecting plantain producer communities.



This proposal will allow us to obtain the required field information to complete the rates of flood overcoming and the digital mapping of hydroclimatic risk agriculture. Preliminary data have been retrieved by our team. This technical information is a starting reference to prepare an agriculture insurance plan against floods. The insurance plan will be validated and adopted by the rural communities under investigation and the main national and regional institutions that offer soft loans to promote agricultural production. The steps to start an agricultural insurance company have also been pointed out. We firmly believe that the results of this work will demonstrate that the proposal is technically and financially viable. By modeling a hydroclimatic risk insurance plan, the particular rural communities that inhabit the south of Lake Maracaibo will benefit. The implementation of this proposal will reduce the economic vulnerability of small and medium producers of Musaceae, among other types of crops.

What actions do you propose?


The purpose of this action is the design and implementation of an agricultural insurance program for the financial management of hydrometeorological risks caused as a result of the increase in floods due to climate variability and change, in farms of small and medium producers of Banana (Musa spp.) variety “Harton Giant”, located in the lowest Chama River basin in the area known as South Zone of Lake Maracaibo in the Mérida and Zulia states of Venezuela, with the objective of reducing the economic vulnerability of small and medium-sized commercial producers of this agricultural item, and guaranteeing sustainability of its production, as a mechanism of adaptation to climate change, to meet demand at the level of consumers, with this area covering about 90% of the national production.

In the lowest Chama river basin, the risks of loss of agricultural production in the face of floods occur to a homogeneous territorial context of high local and regional climatic variability, mainly of hydrometeorological and hydrological origin. Due to its geographic location and its geomorphological condition, it is a territory characterized by a fluvial - torrential morphodynamics, this being the main causality of the risks, transcending the political - administrative delimitation (state, municipality, parish). The intense rains act as the primary threat of hydrometeorological type of the area, being the main causal agent of the floods; becoming a secondary threat of hydrological type. With the action, a risk transfer procedure will be created that guarantees that short-term farmers can recover their plantations, can maintain production and overcome the economic vulnerability derived from these processes, being an unprecedented procedure in Venezuela.

Additionals efforts will be developed as part of this proposal to estimate how the actual level of hydroclimatic risks will rise for the different climate change scenarios that have been defined by the IPCC for this particular region of the north of south America.

Actions, purposes and fundamentals

Part of the purposes pursued through this project is to help reducing the problem of the lack of current and reliable risk information in the area under analysis and for the financial sector (credits and agricultural insurance). If the project is approved, it would allow deepening the knowledge of the functions of distribution of probabilities of occurrence of losses caused by floods, which would be a useful tool for the estimation of costs and the allocation of resources oriented to the financial management of risk. This type of management considers the territorial dynamics and considers which processes of the risk components should be intervened, which implies the need to propose some measures and strategies with technical criteria to avoid, prevent, reduce and transfer the considered risk. In this proposal, the strategy aims to reduce the financial vulnerability of banana producers to cope with floods, through prevention using financial protection; commonly called "risk transfer".

All this will finally contribute to raise awareness, or at least try to draw the attention on decision makers in agricultural insurance and financing, and on the importance of including the risk variable in the planning process in this type of economic activities, associated with the primary sector and, in the present case, the production of musaceas. Although the work is directed at the institutional level, one of its final objectives is to lay the foundations for the formation of a culture of risk of the beneficiary population, once the useful results can be disseminated to the communities and other social actors of the region in the South Zone of Lake Maracaibo.

When a flood occurs, banana plants experience different phases of stress due to excess water. Which can trigger damage or losses in the activity of the crop. Therefore, the investments made by the producer may be compromised to on such point of generating delinquency in the payment of agricultural financing. Among other financial mechanisms used by producers to carry out the planting process. It should be noting that some of the small and medium producers do not have other financial support that guarantees the legal rights of their own land and agricultural infrastructure. It is necessary, as part of its risk management process, to resort to the hiring of agricultural insurance. In this case, the recommended insurance model is insurance against agricultural investment, which is based on providing coverage to direct production costs. This replenishment gives the producer a guarantee of the realization of a new giant plantain plantation (foundation), purchase of inputs, among others. Considering the phenological stage of the crops and the time of occurrence of the hydrological event and its relationship to the crop production cycle.

In this case, the producer pays a premium and receives an agricultural insurance contract (policy). This instrument establishes the circumstances and conditions under which the insurance company will provide an effective solution to the restitution or replacement of production costs due to physical damage to the plants or production losses, in case of occurrence of affectations associated with hydrological events associated with climatic variability and climate change that may cause flooding. Which occur mainly because there is waterlogging of the soil or the overflow of the main drainage of the Chama River on the alluvial plain in which it is located.

To estimate the risk of loss from the probabilistic point of view, it is important to estimate the replacement costs of the permanent crop. For this, it is very important to have data such as: density of plantation (plants/ha), geographical yield of the item (kg/ha), unit price of the item paid to producers (Bs./kg) and harvest estimate (kg/ha). These data are obtained from the statistics collected by the association with producers.

Based on the above data, it is necessary to estimate the value of the insurance premium that the producer would pay monthly, based on a previously established minimum cultivation area of at least 9 ha and up to 80 ha in the pilot phase of the project. The estimated amounts will be used to cover the costs with which to guarantee the foundation of a new crop, as a measure against the threat of flooding, whose stains should be estimated based on the return periods of 2, 5, 10, 30, 50 and 100 years. Whose flood points must be defined and mapped by the use of different techniques, in order to know their areal extent and potential scope.

The scope of the results will be that both the insurance company and the producer will have access to the information, and they will be able to locate their production unit on the risk map for flood insurance. In the risk map the flood zones in which it is located and the corresponding level of risk will be shown. The production units located in the risk areas will be categorized by letters (for example: type D, E, F, G, H, I and J) as they are considered eligible for the standard and preferential coverage. Meanwhile, the production units located in the areas considered to have a high level of flood risk (for instance: type A, B and C) will be recommended to paying an amount higher than the premium value, due to greater exposure to the flood risk. It is recommended that for the insurance contracting process, the producer must make the decision of how much risks coverage he wants and what amount of deductible he could assume.

Conclusion and recommendations

In conclusion, the project will increase the awareness of the risk of banana production due to floods. As an action to absorb the impacts on climate variability and change, we propose the implementation of an agricultural insurance program and study the feasibility of creating an agricultural insurance company. This action together with other measures such as good agricultural practices and drainage systems against excess water, will ensure the continuity of the production not only of bananas, as an item of great economic importance at the local, regional and national level, but also for other agricultural items and groups of direct and indirect beneficiaries. The service may be extended to other types of risk management once a pilot test has been carried out, first considering the banana as a strategic item that contributes to food security. There is a very low risk and financial protection culture using insurance mechanisms or any other instrument in Venezuela. The limited experience available in the subject has failed due to financial crises and lack of data and information on climate and hydrological aspects for insurance companies and local experience in the field of agricultural insurance, as occurred since the mid 1980s. If approved, the project may encourage the adoption of this type of financial management of risks associated with climate variability and change from the agricultural sector.

Finally, it is important to point out that the first results shown on the map of risks due to economic losses caused by floods indicate that a good part of the production units could present only a partial loss of crops to hydrological events.

Preliminary results have shown that floods could very rarely cover all the cultivated land (plots) despite the location of the lowest basin of the Chama River on a large floodplain with simple topography.

However, the potential damage to the internal drainage systems of the production units should not be ruled out, given the accumulation of sediments; with which it could eventually favor the damage or loss of the entire exposed crop.

Therefore, it is suggested to including within the technical recommendations given to the producer, the stepped sowing of plantain, as risk management actions and good agricultural practices, together with the use of the agricultural insurance service.

Who will take these actions?

For the execution of the project it is suggested to inviting as participant institutions, a representation of the board of Banking (private or public), better if it is a bank for agricultural financing attaching on the Ministerio para la Producción Agrícola y Tierras, MPPAT, (Ministry for Production Agriculture and Lands), localized in Los Andes and Zulia Regions; and a representation of Instituto de Desarrollo Rural del Estado Mérida, IMDER, (Rural Development Institute of the State of Merida), and the support of Instituto de Geografia y Conservacion de Recursos Naturales de la Universidad de Los Andes, Venezuela (Institute of Geography and Conservation of Natural Resources of the University of the Andes, Venezuela).

In both cases, they will contribute agricultural financing and technical assistance to the project and, in addition, a contribution to a subsidy of the cost of the insurance premium will be proposed to 80% at least during the pilot phase of the program. For this, the participation in an insurance company is planned; the same will be the body in charge of carrying out all the respective procedures for the promotion, selection of producers, contracting with the insurance policy, management of resources, formation of reserves and payment of compensation in case of accidents in the event of the occurrence of floods.

The executing team will be responsible for carrying out the pertinent steps to establish the necessary links between the participating entities and the producers.

For this, it will be essential to contact the producers through a special call addressed to the association with producers FUMPLAVEN. Which will be responsible for preparing the required spaces to hold the corresponding meetings. In the same way, the team will be in charge of coordinating and carrying out the studies corresponding to the phases of diagnosis, feasibility and design of the project. 

Where will these actions be taken?

The Chama River has its springs in the Páramo de Mifafí located in the Sierra de La Culata towards the north of Mérida, Venezuela, South America. After 200 km of route it ends in the Lake of Maracaibo (by the southeast), in turn belonging to the Slope of the Caribbean Sea. From the political - territorial point of view, the selected area for research (low basin), covers part of the municipalities Alberto Adriani (Mérida State), Colón and Francisco Javier Pulgar (Zulia State). It covers an area of approximately 171,496.32 ha between the North UTM coordinates 197623 - 219451 and UTM East 963625 - 991010 (Datum WGS84, Time Zone 19 N).

The lower basin of the Chama River has a relief from alluvial overflows plain, with the presence of estuaries, shallows and terraces (origin aluvio - torrential and lacustrine), totally of Quaternary age (Pleistocene and Holocene). It is characterized by values of smooth topographic slope (0.1 - 5%). You can also see hills with soft tops and mountains in the area between the shores of the lake and the Andean piedmont. It has a humid and warm climate, with temperature values ranging between 26.9° C and 30° C, which ranges from humid in the south-western part to sub-humid in the southeast part. The precipitation, although abundant, is adjusted to the normal regulations of the rainy periods that prevail over the South Zone of the Lake. The average annual rainfall ranges from 1,749.6 mm. The records indicate an average annual evaporation value of 1,593.2 mm.

The vegetation of the area offers humid forest conditions, always green and with natural vegetation. There are very scattered remains of this type of forest, and towards the foothills there are associations of humid tropical forest and very humid tropical forest.

Currently, large areas of pastureland and diversity of vegetable crops predominate on the plain, mainly Hartón variety plantain and fruit trees as a result of the development of the rural sector.

What are other key benefits?

Previous studies determined that the saturation of the soil due to flooding can damage the plants generating losses in production. That is why, the following insurance modality is suggested: "Insurance against flooding caused by the Chama River": it ensures the damage in quantity caused to the effective surface assured of the cultivation of standing plantains, before the total or partial fall of the sown plants, and the total or partial loss of production due to the overflow. The insurance allows to stabilize the income of the farmer and recover the production costs required for the foundation of a new plantain crop equivalent to the insured area. The maximum value to be compensated is 100% of the insured sum of the cultivated area. The floods in many cases are caused by faults in the works for flood control during flood events, and, in addition, that drainage systems can be quickly clogged by the effects of sedimentation during the process of flood rolling.

What are the proposal’s costs?

The costs of the operation of the proposal include the hiring of an interdisciplinary work team that includes highly specialized personnel of comprehensive risk management and agricultural production engineering. Most of the resources will be allocated to the payment of technical personnel dedicated to the retrieving of information and the checking of the results previously obtained in the work presented by Montenegro (2017), which generates a total cost of approximately € 8,800.

The project considers the realization of training courses and seminars in the field of agricultural insurance, aimed at staff and social beneficiaries of the project, whose cost is around € 7,500. The costs of subcontracting, aimed at the promotion, dissemination, printing of maps and publications, among others, cover an additional cost of € 3,350 and equipment in € 3,000. The budget includes national and international trips for the work team, for a total cost of € 8,000. Other expenses, including miscellaneous, cost € 1,500. The total estimated cost for the development of the project is € 32,150.

Time line

The proposed project will be executed in 18 months. During this time, the awareness of the risk and the actions to manage it will be deepened through the transfer of risk. Before the second year, it is recommended to carrying out a pilot test to provide coverage to banana producing communities. In general, the program should be designed to be implemented in the short term in a period of between 4 and 10 years.

Some actions to be carried out in the short and medium term:

i) Promote the use of agricultural insurance through the dissemination of an educational campaign aimed at the commercial producer through the media and new information technologies.

ii) Carry out training campaigns for the use of agricultural insurance and other instruments for the financial management of flood risk for producers and other beneficiaries, through workshops, brochures and information events, organized by the project coordinators.

iii) Present the flood risks map to producers located in the lower Chama river basin; fact that also, it will make it possible to apply the differential payment of the premiums according to the level of risk measured probabilistically.

iv) During the project, applications (APP) for smart cell phones will be designed to distribute the information, especially the one associated with the flood threat. Currently, many commercial producers have access to this type of technology.

In the long term (50-100 years) the proposed actions will allow:

  • Stabilize the producer's income.
  • Increase the credit credibility of the producer.
  • Reduce the forgiveness, exoneration and restructuring of credits and delinquency in the payment of agricultural financing in the event of losses caused by floods.
  • Guarantee the continuity of the production of plantain (Musa spp.).
  • Extend the service to other items and types of risks.
  • Guarantee food security, which must also to include life insurance against the producer and his family.
  • Create risk culture in the main social actors.

Related proposals

1. Need for establishing climate risk and resilience insurance companies in Africa

This proposal is related to the one proposed here, because it promotes the creation of insurance companies in the face of climate risk.

2. Solidarity architecture Cluster / Cluster Arquitetura solidária (CAS)

It is related to our proposal since it deals with the issue of credit, insurance and technical assistance in case of disaster at the local level.

3. Feasibility study for the implementation of an Index Insurance in Cote d'Ivoire

It is related to the present proposal since it deals with the issue of the implementation of agricultural insurance.


AVALOS, L. y GUERRERO, H. (1982). Propuesta básica para el programa piloto de seguro agro crediticio en el Paraguay. AGROCRED No. 13-82. 63 p.

CALBERTO, G.; CARVAJAL, M. y STAVER, C. (2016). Resultados del sondeo 1: eventos meteorológicos que afectan la producción de banano y plátano. Climate Change, Agriculture and Food Security (CCAFS). 18 p.

DIAZ, M. (2013). El seguro agrícola como herramienta de gestión de riesgos. Enfoque en los pequeños productores de maíz en Colombia. Fundación Empoderando. 94 p.

HATCH, D.; GARCIA, M. y NÚÑEZ, M. (2012a). “Elaboración de programas de seguros agrícolas exitosos y sostenibles. Conceptos fundamentales y pasos iníciales”. Instituto Interamericano de Cooperación para la Agricultura, IICA, San José, C.R. 16 p.

HATCH, D.; NÚÑEZ, M.; VILA, F. y STEPHENSON, K. (2012b). Los seguros agropecuarios en las Américas: un instrumento para la gestión del riesgo. Instituto Interamericano de Cooperación para la Agricultura (IICA). 93 p.

JICA. (1996). Study on Chama River basin conservation project and study on comprehensive improvement of the Apure River basin: user's manual of computer program. Japan International Cooperation Agency.

MONTENEGRO, M. (2017). Propuesta de diseño de un programa de seguros agrícolas y gestión de riesgos a la producción de plátano hartón (Musa AAB) ante inundaciones. Caso de estudio: cuenca baja del río Chama. Tesis de Maestría. Universidad de Los Andes, Venezuela. 167 p. Inédito.

ORDAZ, M.; TORRES, M. y MORA, R. (2013). Vulnerabilidad y riesgo por inundaciones. Instituto de Ingeniería, UNAM. 70 p.

RIVERA, J y TORO, G. (2008). El seguro agropecuario en los países de la Región Andina: una aproximación a su estado del arte. Instituto Interamericano de Cooperación para la Agricultura (IICA). Bogotá. 41 p.

SOLÍS, Y. (2014). Construcción de curvas de costos por daños por inundación a las zonas agrícolas e infraestructura urbana y red carretera del país. Instituto Mexicano de Tecnología del Agua (IMTA). Informe final. Proyecto TH1402.1. 23 p.

SOTO, E.; SERRANO, E.; GUZMAN, M.; SANDOVAL, M. y BOLAÑOS, E. (2008). Manejo de áreas bananeras post – inundación. Hoja divulgativa 3, Corporación Bananera Nacional, San José de Costa Rica, 1 p.

TORRES, J. (2012). Investigación: el riesgo agropecuario. Gestión Aseguradora: innovar la Gestión.

ZABALA, M. (2011). Eficiencia económica en el sistema de producción de plátano (Musa AAB plátano cv. hartón) en los municipios Francisco Javier Pulgar y Colón del Estado Zulia. Tesis de Maestría. Universidad del Zulia. 90 p.

ZIMMERLI, P. (2003). Natural catastrophes and reinsurance. Risk perception natural catastrophes. Swiss Re. 48 p.

Web link: