This brief identifies and addresses key issues facing weather-index-based agricultural insurance. Drawing on diverse experiences from Africa and Central America, it zooms in on key challenges such as affordability, quality of weather data and models, raising awareness and trust in the benefits of insurance products and policy and regulatory frameworks. To have real impact, scale is the first requirement. Scaling strategies require reliable products, access to the rural areas, increased awareness about insurance and cost-effective delivery channels.
ÿThe international conference on ?Weather index insurance in Africa: lessons learnt and goals for the future? was organised by the Department of Economics, University of the Western Cape, in collaboration with its international partners. The conference attracted over 40 participants drawn from academic and research institutions, insurance practitioners, reinsurers, government policy makers, bankers, agricultural producers, and representatives of non-governmental organisations. The presenters highlighted experiences, challenges and opportunities based on current pilot projects on weather index insurance in many parts of Africa.
Governments in developing countries have been increasingly involved in the support of agricultural (crop and livestock) insurance programs in recent years. In their attempts to design and implement agricultural insurance, they have sought technical and financial assistance from the international community and particularly from the World Bank. One of the recurrent requests from governments regards international experience with agricultural insurance, not only in developed countries, where in some cases agricultural insurance has been offered for more than a century, but also in middleand low-income countries. Governments are particularly interested in the technical, operational, financial, and institutional aspects of public support to agricultural insurance. 'Government Support to Agricultural Insurance' informs public and private decision makers involved in agricultural insurance about recent developments, with a particular focus on middle- and low-income countries. It presents an updated picture of the spectrum of institutional frameworks and experiences with agricultural insurance, ranging from countries in which the public sector provides no support to those in which governments heavily subsidize agricultural insurance. This analysis is based on a survey conducted by the World Bank s agricultural insurance team in 2008 in 65 developed and developing countries. Drawing on the survey results, the book identifies some key roles governments can play to support the development of sustainable, affordable, and cost-effective agricultural insurance programs.
This paper is a distillation of the findings of the work undertaken by the World Bank. It is deliberately not a collation of case studies, but rather a practical overview of the subject. The purpose of this paper is to introduce task managers and development professionals, who are not insurance sector specialists, to weather index insurance. Ultimately, the paper seeks to take the reader through the main decision points that would lead to a decision to embark upon a weather index insurance pilot and then assists them to understand the technical procedures and requirements that are involved with it. In addition, the paper seeks to advise the reader of the practical challenges and implications that are involved with a pilot of this nature and what they might expect to encounter during the initial stages of implementation. The very nature of an index based product creates the chance that an insured party may not be paid when they suffer loss and/or that they may receive a payment when they have suffered no loss. This paper also does not seek to delve deeply into the technical details and science that lie behind the 'black box' that is at the heart of the index.
ÿWorldFish and the International Centre for Climate Change and Development (ICCCAD) held a two-day workshop on the topic of Weather Index-Based Insurance: Lessons Learned and Best Practices for Bangladesh. Weather index insurance is based on a predefined weather event which when triggered ensures automatic payout to farmers who have taken out insurance. For example, the climatic trigger could be a predefined consecutive number of days where rainfall is below a set level or when the floodwater level reaches above a certain point. Index insurance has been operating for about 10 years in many countries but is still at an early stage in Bangladesh, where there are two schemes currently being piloted and three other projects being developed. The aim of the two-day workshop was twofold: to ascertain the present state of index insurance in Bangladesh and elsewhere, and to work together to identify ways forward.
As climate variability gains prominence in the international policy agenda, public and private sectors alike are increasingly considering strategies to cope with its economic and social consequences. In turn, the general publicfaced with a growing number of extreme weather events and natural hazardsis beginning to demand concrete action. One sector where climate variability and its associated risk have the most damaging impact is the rural economy, in particular smallholder farmers. This brief outlines some of the adverse effects that climate variability has on the rural economy and describes how different insurance mechanisms can contribute to reducing vulnerability and increasing resilience to weather risks.
Everywhere in the world, small agricultural producers are entrepreneurs, traders, investors, and consumers, all rolled into one. In all these roles, small agricultural households constantly seek to use available financial instruments to improve their productivity and secure the best possible consumption and investment choices for their families. But the package of financial services available to small farmers in developing countries is severely limited, especially for those living in remote areas with no access to basic market infrastructure.
