Forest insurance and subsidy policy in Brazil: a theoretical and methodological review

Abstract

In the last 10 years, the Rural Insurance Premium Subsidy Program (PSR) has covered, on average, only 20% of the demand for forest insurance in Brazil, and in 2023, only 5.71% of the more than 10 million hectares of commercial forests had coverage linked to the program. Given this scenario and the scarcity of national literature on the topic, this paper describes the forest insurance market in Brazil, focusing on the PSR, and explores the frontier of economic knowledge on the subject. It was observed that the low budget availability for subsidies reduces the attractiveness of forest insurance for both insurers and producers. In Brazil, as this modality represents a small portion of the PSR budget, it is recommended to supplement the budget to expand the market and reduce production risks, especially in the context of climate change.