(TCP PROJECT EXAMPLE)

I. PROJECT SUMMARY

(Brief description of the project expectations and outcome)

II. BACKGROUND AND JUSTIFICATION

Although industry and services have become leading contributing sectors of the XXX economy, the 1980s witnessed renewed emphasis on agriculture. All but a few agricultural commodities (deemed strategic) are now part of the free market economy, subsidies on inputs were largely abolished, but some subsidies remain, including the provision of credit to agriculture at highly negative real interest rates, and of irrigation water at substantially below production cost. Agricultural development has been rapid and is still accelerating. In most basic commodities, XXX is now self-sufficient or is becoming a regional exporter (fruit, vegetables and meat). However, the climatic conditions in the country are such that risks are significant. Management of these risks is vital for the poorer section of the population. The main climatic risks are precipitations (when in shortage or surplus), winter and spring frosts and other perils (excessive heat at critical times, hail, snow and windstorm).

While management of losses is possible, based on recommendations regarding relationships between agricultural enterprises, varieties planted and agro-climatic zones, there is sometimes a role, in addition, for a carefully designed crop insurance mechanism.

In particular, there is a major topographical factor which makes frost risk a very real challenge in a few of the fruit-growing parts of the country. The heavily eroded hillsides in these regions are unsuitable for cultivation, but the valleys, beneficiaries of topsoil from the hills, are productive, and are heavily utilized. Unfortunately, these valleys also form frost traps, and many have insufficient slope for frost drain action to be effective.

In the frost-prone areas, the Ministry of Agriculture (MOA) operates a frost warning service, with farmers alerted to the danger when temperatures fall below specified limits. Ministry vehicles are sent out with loudspeakers to sound the warning. In some intensively farmed areas, farmers have also been provided with their own alarm devices. Farmers utilize frost pots, burning diesel fuel, the burning of pruned wood or old motor tires in order to keep air moving. In some areas sprinkler irrigation is employed, though this has the reputation of facilitating disease. Air movement generated by electrically powered fans, sited on towers 8 to 12m high, is now possible, though the technique is expensive (the equipment costs the equivalent of approximately US$ 6 000 to install). However, the Agricultural Cooperative Bank is now offering loans for the purchase of these fans. The Extension Service of the Ministry of Agriculture has published and made available at field level an advisory booklet on managing the risk of frost. In addition, farmers practise inter-planting in their orchards, mixing species with differing time sensibilities to frost. A common mix is cherry and olive. In plastic houses the control of frost is easier as many of these structures are fitted with electrically or diesel powered heaters (diesel fuel is cheap in XXX - some 15 US cents per litre). However, when temperatures are very low, even the heaters have limited capacity to compensate.

Crop losses due to adverse weather events have also prompted a number of committee meetings between concerned government departments over recent years. Some consideration has been given to establishing a compensation scheme, but no action has been taken beyond the collection of information on the extent of losses, and the suspension of interest payments on loans from the Agricultural Cooperative Bank. The latest inter-departmental meeting, held earlier in July, 1997, recommended that a fund be established, and made some draft proposals as to some operational details. Moreover, it recommended those crops and perils which should be subject to compulsory inclusion in the compensation scheme. The list is as follows:

• wheat: fire, hail, excessive rain
• cotton: fire, hail, excessive rain
• sugar beet: frost, excessive rain

The committee held open an option that other crops could be included on a voluntary basis. It further noted that levels of compensation, and methodologies for loss assessment would be determined by the fund management, following closer study. It further recognized the need for any local insurance risk fund to be backed, as operations and therefore risk-volume grow, by international reinsurance.

The need to increase private sector investment in agricultural production prompts consideration of the risks involved, and therefore of the role of crop insurance as part of an on-farm risk management strategy. Crop insurance currently does not exist in XXX. FAO, through its TCP programme, is requested to provide expertise and assist the MOA in establishing a core agricultural insurance plan, as a demonstration window for longer-term crop insurance activities in the country.

Since, in the XXX context, the public sector plays very active key roles in the two sectors principally concerned with any agricultural insurance operations - i.e. the agricultural and financial sectors, the TCP project should prepare an overall plan, with alternative mechanisms and responsibilities, as appropriate. These can later be a matter of discussion and choice, by the relevant authorities. Strong interest has been expressed by the authorities in getting crop insurance operations underway.

III. OBJECTIVES OF THE ASSISTANCE

The main objective of FAO's assistance is to design a suitable core agricultural insurance programme, as a follow-up to the recommendations of the above-mentioned committee. The intention is to incorporate the best practice in agricultural insurance, on the basis of experience both in the region, and elsewhere in the world. An additional benefit is that a properly constituted insurance programme, with clear contractual obligations, would remove the uncertainty of a contingent liability on the public exchequer, a liability of unknown proportions.

A related objective is to provide an embryonic training capability which could readily expand operations as the business of crop insurance grows. Another related objective is to facilitate setting up of a core of insurance products, which would constitute the basis for commercial crop insurance operations, and open a window for reinsurance.

IV. PROJECT OUTPUTS (RESULTS)

The project will provide the following outputs:

• A Core Crop Insurance Plan for consideration by the Government. This would detail the crop insurance products which could be offered initially by the National Insurance Company, assisted by MOA. It would include model Policy Wordings.
• Creation of expertise by training supervisory key staff of MOA, Agricultural Cooperative Bank and National Insurance Company (a parastatal body).
• Training capability established in MOA for field staff.
• Field staff of MOA trained for pilot crop insurance operations.

V. WORK PLAN

Mission phasing and composition is summarized in the table in Annex.

Mission 1
Composition: Team Leader (5 days), International Operations and Training Specialist (10 days), Climate Analyst (30 days), Agricultural Risk Specialist (30 days), Translator/Interpreter (30 days), Bilingual Secretary (30 days).

Outputs: The Mission 1 output will consist of a draft design for an agricultural insurance operation, covering the following, with special reference to the pilot nature of the initial operations:

• Compulsory (automatic) cover, or voluntary cover?
• Crop insurance alone, or more general agricultural insurance (including also livestock)?
• Type of farmer insured: just borrowers from the Agricultural Cooperative Bank, or all farmers?
• Nature of the regions, crops and perils involved - special consideration should be given to the recommendations of the compensation committee, quoted in paragraph 9 above. The scheme should envisage involving already at the start certain key crop(s), with careful consideration given as to whether coverage could be arranged nation-wide, or restricted to one or two governorates.
• Procedures and responsibilities for setting premium and indemnity levels.
• Procedures for collecting premiums and paying indemnities.
• Loss adjustment mechanisms and responsibilities, with special attention to the role of the Extension Service of the Ministry of Agriculture.
• Administrative structure - with special attention to the potentially important roles of the National Insurance Company and the Agricultural Cooperative Bank. Liaison mechanisms between different ministries and agencies must be detailed.
• Financing the programme; building up reserves, role and structure of re-insurance and/or a special government reserve fund.
• Phasing in of a nascent insurance programme; the desirability and detailed proposals for initial operations. Proposals for monitoring initial operations, with a view to expansion as quickly as is feasible, on the basis of lessons learned and human skills acquired.

Mission 2
Composition: Team Leader (5 days), International Finance Specialist (10 days), International Operations and Training Specialist (5 days), TCDC Loss Assessment Specialist (30 days), Agricultural Risks Specialist (as required), Translator/Interpreter (30 days), Bilingual Secretary (30 days).

Outputs:
- Detailed revised insurance plan, including list of initial crop products and draft policy wordings.
- Insurance fund assessment - phased - in draft form.
- Reinsurance needs assessment, phased over time - in draft form.
- Draft loss assessment draft manual for crops in the initial products list.
- Report on training needs and how these can be met.
- Selection of two study tour officials.

Mission 3
Composition: Team Leader (5 days), International Finance Specialist (10 days), International Operations and Training Specialist (10 days). National Climate Analyst (5 days), Agricultural Risks Specialist (as required) Translator/Interpreter (10 days), Bilingual Secretary (10 days).

The third Mission will comprise a one-day National Workshop, follow-up discussions, report annex finalization, plus training.

Outputs:
- Final list of crop insurance products and associated policy wordings.
- Recommendations on premium and indemnities for each product, procedures for issuance of policies, premiums and claims payment procedures.
- Finalized loss assessment manual for initial crop products.
- Four staff trained in insurance operations.
- Firm proposals for reinsurance arrangements.

Study Tour to YYY (to take place between mission 2 and mission 3)
This tour will involve two officials from XXX for two weeks, led and coordinated by the TCDC Loss Assessment Specialist.

The draft report will be translated into Arabic. Using the report, two key officials (one from the Ministry of Agriculture, and one from the National Insurance Company) will undertake a two-week study tour in order to examine the procedures in place in YYY, in the light of the proposals for XXX.

A National Workshop will be held in order that the draft recommendations generated under the TCP exercise can be debated by those authorities concerned. The study tour participants will be expected to play leading roles in this Workshop. The TCP team members will then finalize their report, benefiting from the debate in the National Workshop.

Initial training will then be undertaken, in two phases. In the first phase, two Ministry officials, assisted by an International Crop Insurance Specialist, will prepare training programmes for key extension staff in local administration of crop insurance operations, and in loss assessment. They will then carry out training at field level in the pilot areas of the overall programme. Training content will be determined during the course of the project and will follow a consideration of local capabilities in the light of the work actions required under the finalized Crop Insurance Plan. Tentative estimate is for 16 extension staff, each undergoing two-week courses, mainly on loss assessment.

VI. CAPACITY BUILDING

The draft technical plan for agricultural insurance operations will be produced by the team of international and national experts, in conjunction with the TCDC loss adjustment specialist from YYY and officials from MOA. Overall direction will be provided by FAO/AGSM staff. In this way, the TCDC specialist and the selected officials from MOA will gain experience working with international experts in the formulation of draft designs for agricultural insurance operations. Furthermore, through the project, the experience of FAO in providing technical expertise on product design and techniques relevant to agricultural crop insurance will be made available.

VII. INPUTS TO BE PROVIDED BY FAO

Personnel Services

Technical services of international consultants
- International Consultant in Financial Structure and Re-insurance Design - 30 days' inputs, of which 20 days in XXX (2 missions of 10 days each) and 10 days at home base.
- International Consultant inn Crop Insurance Operations and Training - 40 days' inputs, of which 25 days in XXX (3 missions of 10, 10 and 10 days) and 10 days at home base.

Expertise under the Partnership Programme (TCDC)
- TCDC Loss Adjustment Specialist - 2 months' inputs, of which 1 month in XXX and 1 month at home base (YYY) preparing for and escorting/guiding the trainees in the Iran study tour.

National Experts and Consultants
- A national Agricultural Risk Specialist and a national Climate Analyst will be selected and recruited for 2.5 months and 1.5 months respectively.

Supervisory Technical Services (STS)
- Technical supervision will be provided by an FAO technical officer (Team Leader/Agricultural Insurance Design Specialist) - 30 days' inputs, of which 15 days in XXX (3 missions of 5 days each) and 15 days at HQ.

Support Personnel
- Funds will be provided to hire specialist translators and interpreters to supplement MOA staff as required. A full-time bilingual (Arabic-English) secretary will be employed by the project (up to US$16 000).

Official Travel (up to US$4 000).
A budget provision is made to cover the internal travel costs and DSA of project personnel.

Contracts
Funds up to U$$22 000 are to cover the cost of preparing technical documentation and organizing the National Workshop and the subsequent training courses (envisaged to be carried out by the ........). See Terms of Reference in Annex 7.

General Operating Expenses (GOE)
An amount of US$5 730 will be allocated to cover miscellaneous expenses required for operating the project, such as telephone/fax communications, photocopy paper, etc., and to cover processing of the terminal statement.

Materials and Supplies
The cost of materials and supplies will be up to US$5 000, for stationery for report preparation and training, diskettes for PC and purchase of various reports and documents as necessary.

Equipment (up to US$ 19,000)
- A two-wheel drive station wagon (US$15 000) will be provided and fitted with training materials and equipment in order to facilitate the training of village level extension officers.
- One computer and one printer will be supplied to MOA in order to enable the full time, bilingual (Arabic/English) secretary to process in due time all project documents, reports, etc. (US$4 000).

Direct Operating Costs
- Direct expenses at FAO Headquarters, connected with the implementation of the project, up to US$13 000.

Training (up to US$25 000)
Funds are to cover the following costs:
- Study tour: two officials to YYY for two weeks. Product of this will be a set of practical notes augmenting the report by the TCDC consultant on crop loss assessment. These notes, for each crop will cover:
(a) Notification of loss timing and procedures
(b) Procedure for decision on whether or not a field visit to each farm claiming a loss in a given district is needed, or whether sampling will suffice
(c) Actual techniques for assessment of loss, specific to crop and period
(d) Reporting format
(e) Supervision recommendations.

Cost per trainee: US$2 000.

Training Extension Staff in Crop Insurance Operations
Number: 16
Length: 2 weeks
Content: Extension of procedures developed by the TCP team, practical example material and live situations in the field. Production of operations manual for field staff compiled during the training itself.
Cost:
- Manual: (S$4 000)
- Training: (16 x US$1 000)
- Misc.: (US$1 000).

VIII. REPORTING

A detailed Draft Technical Plan will be prepared as set out in the work plan, and this will be revised following the planned National Workshop. Interim, internal reports will be prepared by the international consultants as required as inputs to the Draft Technical Plan.

The Team Leader will prepare a Terminal Statement, which will essentially summarize the Technical Plan.

IX. GOVERNMENT CONTRIBUTION AND SUPPORTING ARRANGEMENTS

The Ministry of Agriculture (MOA) will ensure the cooperation of officials in the Ministry of Agriculture and its regional and unit offices, the Agricultural Cooperative Bank, the National Insurance Company and the XXX Meteorological Service, all of whom should be prepared to provide data and advice on request.

The Ministry will also provide translators to assist project staff in handling both Arabic to English and vice versa, and interpreters to assist foreign specialists, both in the capital and in the field. The MOA will nominate two full-time drivers. The MOA will provide back-up transport facilities to the project consultants. The MOA will make office and meeting room facilities available.

The Government will set up a decision panel to consider the output of the TCP project with a view to operating a core crop insurance scheme and the means for its ongoing evaluation, and contacts with sources of re-insurance.

PROJECT BUDGET COVERING FAO INPUTS
(in U.S. Dollars)

ANNEX TABLE

MISSIONS PHASING

X = 5 days

ANNEX 1

TERMS OF REFERENCE

TEAM LEADER/AGRICULTURAL INSURANCE DESIGN SPECIALIST

The Team Leader, who is envisaged to be from FAO Headquarters, will carry out the following tasks over a total input of 1 m/m:

1. Select the national consultants, the TCDC expert and the international consultants.
2. Supervise the work of the five other persons in the team, ensuring adequate interface with the XXX national authorities, provide detailed technical guidance on the risks to be considered, and participate in determining the methodologies for fixing premiums and indemnities.
3. Ensure the successful completion of the draft and final Crop Insurance Plan.
4. Make arrangements for the envisaged study tour to YYY.
5. Select the persons to be trained in XXX under the project and make arrangements for this training to be carried out under the project.

Mission 1 (5 days)
(a) Brief in detail the Climate Analyst and the Agricultural Risks Specialist and establish working arrangements for these national consultants, including liaison and reporting arrangements with other team members and support staff.
(b) Following initial reporting by the national consultants and discussions with the Crop Insurance Operations and Training Specialist, establish in draft the broad features of the draft core programme and leave for the team to complete this draft.

Mission 2 (5 days)
(a) In consultation with XXX authorities (MOA and National Insurance Company) select and brief the two officials to undertake a study tour in YYY.
(b) Establish working arrangements for the TCDC Loss Assessment Specialist and the International financial Structure and Reinsurance Specialist.
(c) Supervise drafting of outputs.

Mission 3 (5 days)
(a) Supervise preparations for National Workshop in consultation with senior officials of MOA and National Insurance Company.
(b) Supervise arrangements for training.
(c) Establish the procedures for finalizing the final report.

Supervisory Technical Services at HQ (15 days)
(a) Study mission reports and determine/supervise required amendments.
(b) Maintain telephone/e-mail contact with all project staff.

ANNEX 2

TERMS OF REFERENCE

FINANCIAL STRUCTURE AND RE-INSURANCE DESIGN SPECIALIST (INTERNATIONAL CONSULTANT)

Under the overall supervision of the Operations Branch of the Regional Office for the Near East (RNER), the technical supervision of the Chief, Marketing and Rural Finance Service (AGSM), and the direct supervision of the Team Leader, the Financial Structure and Re-insurance Design Specialist, over a period of 1 m/m, will carry out the following tasks:

1. Design a viable financial structure for the proposed insurance scheme, noting in particular the requirements for additional funds, the way in which money flows will be actioned, reported and audited.

2. Quantify the element of re-insurance required and map out a strategy for this re-insurance to be provided, following 3) below.

3. Make inquiries in the lead re-insurance markets for agricultural risk as to the extent to which the XXX risks envisaged in the overall plan could be covered at affordable cost.

4. Provide a report on these matters for inclusion in the final document.

First Mission (participation to mission 2 in the work plan, 15 days)
(a) On the basis of the work of other team members and discussions with officials of MOA, the National Insurance Company and the Agricultural and Cooperative Bank, recommend a draft financial structure for both initial and expanded operations.
(b) Determine re-insurance needs (to be followed up at home base).

Second Mission (participation to mission 3 in the work plan, 5 days)
Participate in the National Workshop and, on the basis of known re-insurance capacity, finalize the initial financial structure for crop insurance, indicating the role of retained capacity in XXX and international re-insurance.

Reporting (10 days, home-based)
Prepare a report on the product of these services.
Written output in English in Word, hard copy and electronic file.

Qualifications and Experience
Graduate in agricultural science, economics or public administration. Ten years' relevant experience in designing crop insurance programmes for a variety of agro-climatic zones. Good knowledge of and contracts with commercial providers of reinsurance services for agricultural risks.

ANNEX 3

TERMS OF REFERENCE

CROP INSURANCE OPERATIONS AND TRAINING SPECIALIST
(INTERNATIONAL CONSULTANT)

Under the overall supervision of the Operations Branch of the Regional Office for the Near East (RNER), the technical supervision of the Chief, Marketing and Rural Finance Service (AGSM), and the direct supervision of the Team Leader, and over a period of 40 worked days, this International Consultant will carry out the following tasks:

Mission 1 (10 days)
(a) Given the risk material and climate analysis provided by National Consultants, identify the operational procedures required for a viable crop insurance scheme in XXX, noting in particular the scope for liaison with the National Insurance Company.
(b) Identify additional skills required amongst staff of the Ministry of Agriculture, on the one hand, and the National Insurance Company on the other, and draw up a training schedule accordingly.

Mission 2 (10 days)
(a) Modify the initial insurance plan, following the detailed information made available by national consultants.
(b) Assist the Team leader in arrangements for the Study Tour in YYY.

Mission 3 (10 days)
(a) Participate in the National Workshop and subsequent report modification.
(b) Carry out short and intensive training sessions for the key persons involved, including trainers of field extension staff, to enable insurance operations to commence once the necessary legislative and other matters are accommodated.

Reporting (10 days, home-based)
Prepare a report on the product of these services.
Written output in English in Word, hard copy and electronic file.

Qualifications and Experience
Graduate in economics, business, agricultural or public administration. Five years' relevant experience in designing manpower support programmes for crop insurance operations. Practical experience in training.

ANNEX 4

TERMS OF REFERENCE

LOSS ASSESSMENT SPECIALIST (TCDC EXPERT)

Under the overall supervision of the Operations Branch of the Regional Office for the Near East (RNER), the technical supervision of the Chief, Marketing and Rural Finance Service (AGSM), and under the direct supervision of the Team Leader, over an input period of 2 m/m, the Loss Adjustment Specialist, will carry out the following tasks:

Mission in XXX (participation to mission 2 in the work plan, 30 days)
1. Accompany the International Consultants and the National Agricultural Risk Specialist in the project work, building up a dossier of loss assessment tasks on a crop/peril basis.
2. Study the nature of the husbandry in XXX to be included in the programme, i.e. wheat, cotton and sugar beet, noting key factors for loss assessment, including existing and potential "control" points, i.e. crop estimation, delivery to market procedures, etc.
3. Demonstrate how the field loss assessment procedures can be monitored effectively at Headquarters and how an internal auditing of the loss assessment procedures can be carried out.
4. Drawing on the YYY experience, draft loss assessment procedures for each of these crops for the following perils: fire, hail and excessive rain (for wheat and cotton) and for sugar beet, frost and excessive rain.
5. Prepare for YYY Study Tour by briefing the two experts selected

Mission in YYY (30 days)
Make detailed preparation (15 days) and lead/assist study tour participants (15 days) concentrating on loss assessment at field level, reporting arrangements and central mechanisms.

Reporting
Prepare a report on the product of these services.
Written output in English in Word, hard copy and electronic file.

Qualifications and Experience
Sound practical experience in both carrying out field loss assessment, and supervising the overall loss adjustment process. Ability to work in English.

ANNEX 5

TERMS OF REFERENCE

AGRICULTURAL RISKS SPECIALIST (NATIONAL CONSULTANT)

Under the overall supervision of the Operations Branch of the Regional Office for the Near East (RNER), the technical supervision of the Chief, Marketing and Rural Finance Service (AGSM), and the direct supervision of the Team Leader, the Agricultural Risks Specialist will carry out the following tasks over a total input of 2.5 m/m, concentrating on the key crops, i.e. wheat, cotton and sugar beet:

1. Identify the risks due to weather events, which are faced in the main by these crops.

2. Quantify, where possible, the losses from past adverse events of either weather or fire, by region and district, and place a monetary value on these losses.

3. Outline the risk management procedures currently in place to guard against or to attempt to deal with these perils, and comment on the effectiveness of these.

4. Identify remaining unmanaged risks and the extent to which these could be covered by a compensation scheme.

5. Collaborate with other team members, as required.

Missions
The incumbent will accompany the international team member as required during all three missions. He/she will be the main liaison officer for the National Workshop.

Reporting
Written output in English in Word, hard copy and electronic file.

Qualifications and Experience
Graduate, knowledge of English, Arabic (written and spoken), personal knowledge of agricultural sector in XXX, institutions supporting agriculture and sources of information on agricultural losses and current risk management procedures.

ANNEX 6

TERMS OF REFERENCE

CLIMATE ANALYST (NATIONAL CONSULTANT)

Under the overall supervision of the Operations Branch of the Regional Office for the Near East (RNER), the technical supervision of the Chief, Marketing and Rural Finance Service (AGSM) and the direct supervision of the Team Leader, and over a period of 1.5 m/m, the Climate Analyst will provide a history of adverse weather effects experienced in the main agricultural regions of XXX over the last ten years, concentrating on frost, hail and excessive rain.

Any patterns in climate should be highlighted and the extent, in terms of area affected, by adverse perils should be noted.

Calculations should be made of the frequency of adverse weather events (excluding drought), by type of event and by district.

Mission 1 (30 days)
Initially accompany the Team Leader and other mission members, but then work largely independently on compiling data on incidence of weather perils and associated losses of specific crops.

Mission 3 (5 days)
Participation in the National Workshop and subsequent report finalization.

Reporting
Written output in English in Word, hard copy and electronic file.

Qualifications and Experience
Graduate. Sound knowledge of and access to weather records, district by district, in XXX. Ability to work in English and Arabic.

ANNEX 7

TERMS OF REFERENCE

CONTRACTS

Under the administrative supervision of RNE/Operations Cairo and technical supervision of FAO/AGSM Rome, the contractor will organize the National Workshop to be held during Mission 3. This will involve:

(i) Checking the translation and printing technical papers for the Workshop.
(ii) Provision of a Workshop Secretariat.
(ii) Making all logistic arrangements including payment of travel and per diem expenses for participants coming from outside the capital of XXX.
(iv) Printing the Workshop Report.