THE agricultural insurance sector in the Philippines is still underdeveloped, the United Nations' Food and Agriculture Organization (FAO) said.

In its latest report, the FAO said that local farmers and fisherfolk mainly depend on informal sources of financing for their needs. These sources are usually community traders who offer farmers credit for items like seeds and fertilizers.

It added that these informal sources usually step in due to the absence of formal financial institutions.

"These kinds of financial products are significantly more expensive, more limited, and less flexible than those provided by formal financial institutions," said the FAO.

It cited the Philippine Crop Insurance Corp. as the only public entity offering agricultural insurance services in the country.

On the other hand, private insurance providers are "non-existent in the agricultural sector."

"The state of underdevelopment of a private or public–private market for agricultural insurance in the Philippines represents a huge missed opportunity," said the FAO.

The UN agency also noted that the lack of efficient agricultural insurance remains obvious, especially for small-scale farmers compared to larger agribusinesses.

It noted that a competitive offer of disaster risk insurance products would foster Filipino farmers' resilience given their high levels of exposure to risks such as drought and irregular rainfall patterns.

The FAO specifically cited the absence of agri-insurance in the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM), which experiences flooding every year in the area around the Mindanao River Basin, which causes substantial damages to crops and livestock.

The FAO said such a scenario is a major factor that has curtailed BARMM's socioeconomic growth.

"Over the years, the combination of extreme natural events has caused substantial disruptions to the agricultural food supply and its related value chains in the region, which resulted in critical issues such as food insecurity, malnutrition, and rural-to-urban migration," it said.The UN agency recommended varied and competitive disaster risk insurance products. These would serve as a powerful tool to build farmers' creditworthiness, smoothen their incomes, and strengthen the overall stability of the agriculture sector.