Crop Insurance as a Risk Management Strategy in Bangladesh

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Figure 6.17 Organizational preferences for CI by the respondents in Lalmonirhat 93 Figure 6.18 Relationship between premium and income level 94 Figure 6.19 Focus Group Discussions (FGD), Nazirpur, Pirojpur 96 Figure 6.20 Focus Group Discussions in Tahirpur, Sunamganj 97 Figure 6.21 Roundtable Discussion on Feasibility of Crop Insurance as a Risk management Strategy in Bangladesh 98 Figure 7.1 Weather Stations of BMD and Hydrological stations of BWDB 111 Figure 7.2: Methodology to fix station coverage 112 Figure 7.3 Precipitation variations along Bangladesh 113 Figure 7.4: Determination of inundation height for flood 115 Figure 7.5 Land type with inundation depth along the entire country. 116 Figure 7.6 Defined danger level by BWDB for different rivers (Level varies on topographical condition) 117 Figure 7.7 River flow and water level stations (Real time monitoring by FFWC) 118 Figure 7.8: A weather contract for drought based on rainfall 120 xii
Executive Summary In recent years, natural disasters, particularly climate-related ones, have increased both in frequency and magnitude. Scientists the world over have agreed (IPCC AR4, 2007) that human-induced climate change is exacerbating this impact. Agriculture sector is likely to be affected most due to extreme weather events like cyclone, flood or drought. So, the farmers are hit hardest. For floodplain countries like Bangladesh, structural measures for management of disaster risk and its consequences often were found less effective. So non-structural measures like micro-insurance or crop insurance are being suggested as a risk management strategy. The rationale is that poverty and vulnerability to climate change feed each other, and this nexus warrants that climate change policies work in concert with poverty reduction policies. However, traditional micro-credits and savings are inadequate when poor farmers with no safety or security nets are exposed to risks beyond their means to cope with. Therefore, micro or crop insurance (CI), customized to specific needs of the poor, may be an effective instrument for the purpose. UN Climate Convention and the Kyoto Protocol have included the provision of insurance as a mechanism to address the risks from climate change. Keeping this in view, the Climate Change Cell of the Department of Environment has commissioned this study to the Department of Environmental Science and Management (DESM), North South University. As it is known, insurance is a financial instrument of buying potential risks. But the size of insurance market can be viewed not only as an indicator of development, but also as an indicator of social & cultural fabric of any society. The question of premium cost apart, there is the general expectation that the Government or NGOs will come forward to rescue in the aftermath of any disaster. The question of the hard-core poor is different. But the nonpayment of bank loans or indemnifying them has become a culture in Bangladesh. What is being referred to is a culture of moral hazard. Against this trend, the Government spends huge money for ex-post disaster management, which again has political overtones. On the other hand, private sector to a large extent in Bangladesh continues to live with the idea that any kind of public welfare program is a government business. The concept of corporate social responsibility (CSR) is yet to be internalized by the larger segment of the private sector in our society. In many developing countries including Bangladesh, crop insurance has been introduced about 3 decades ago. Some of these countries are continuing, while in some others, it has stopped functioning, because of incurring heavy losses. As a stand-alone instrument, CI is not financially viable anywhere in the world. Even in the industrial countries, it continues functioning as a public welfare program. In fact, agriculture sector is subsidized in all countries in many different ways. This happens more when a natural disaster hits the farmers. Therefore, CI as an instrument of adaptation has to be seen from a wider angle, not just from conventional cost-benefit analysis. The Sadharan Bima Corporation of Bangladesh has again taken initiative in the form of a proposal to introduce CI, this time in partnership with other stakeholders. But the private sector is yet to respond. Good news is that the prospect of microinsurance is improving day by day and many of the private insurance companies are considering it as an option. xiii
Page 1: Crop Insurance as a Risk Management
Page 4 and 5: Crop Insurance as a Risk Management
Page 7: Foreword The impacts of global warm
Page 10 and 11: ILO International Labor Organizatio
Page 12 and 13: 3.6 Crop Insurance: some Terminolog
Page 14 and 15: Table 3.6 Advantages and challenges
Page 18 and 19: Therefore, the main objective of th
Page 20 and 21: can be classified under different r
Page 22 and 23: National Reinsurance Scheme: The pu
Page 25 and 26: 1.1 Statement of the Problem Chapte
Page 27: improving day by day and many of th
Page 30 and 31: Individual or area approach: To det
Page 32 and 33: Availability of Trained Personnel:
Page 34 and 35: FGD was mainly conducted among the
Page 36 and 37: outputs were critically analyzed an
Page 38 and 39: Comments specifically related to me
Page 40 and 41: Figure 3.1: Factors causing variati
Page 42 and 43: than ten times, while the global po
Page 44 and 45: Figure 3.8: Change in Palmer Drough
Page 46 and 47: yielding but drought resistant vari
Page 48 and 49: implement from the perspective of p
Page 50 and 51: Table 3.4: Present status of disast
Page 52 and 53: 3.5 Limitation of Crop Insurance: P
Page 54 and 55: amount is measured by the extent of
Page 56 and 57: Contract (SUC). The premium rate fo
Page 58 and 59: Box 3.1: Examples of Parametric or
Page 60 and 61: Therefore, index products are a bit
Page 62 and 63: 3.10 Crop Insurance Experience at D
Page 64 and 65: 3.11.2 Canadian Experience Crop ins
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farmer was 150 percent of the crop
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segments of the population often en
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Chapter 4: Crop Insurance - Banglad
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development of insurance business i
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unanticipated catastrophic natural
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1 st stage ……………………
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Taka 80,000.00 60,000.00 40,000.00
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and requirements of the insurance h
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Defining risk-reduction measures by
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Chapter 5: Climate Change and Agric
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21 1990 CYCLONE 39 127 171099 24289
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ppmv of CO2 combined with a 4 0 C i
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Crop Damage fully ( acre) 4000000 3
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Table 5.5: Partial listing of cyclo
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Figure 5.7: Monthly mean temperatur
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magnitude or an intense or high mag
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Historical monthly values Mean Stan
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6.1 Field Survey Chapter 6: Crop In
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Son of BoroBari now day labor (Curt
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Figure 6.4: Drought prone regions o
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Figure 6.7: Response to disaster al
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Figure 6.10: Agro-ecological sub-re
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season. Sunamgonj, as Haor region,
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% of farmer % of farmer % of farmer
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6.3 Farmer’s Views on Climatic Ef
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disastrous affect as such mode of l
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disbursement and Insurance Company
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Chapter 7: Summary Findings & Demon
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an incident occurred and farmers we
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Moral hazards: Theoretically moral
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duration of disaster is important h
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increased to 8.51% in 2003. Such a
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- Referring to crop growth models u
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data, for example, can establish an
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particular gauge station can be com
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Figure 7.6 Defined danger level by
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Methodology to develop an index in
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Structuring the Product Once the in
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did not cross the Weather Index val
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methodology, and applicability can
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References Anderson, J. (2001). Ris
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Linnerooth-Bayer, J., Mechler, R. a
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Crop Insurance as a Risk Management Strategy in Bangladesh

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