The Potential for Scale and Sustainability in Weather Index Insurance

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THE POTENTIAL FOR SCALE AND SUSTAINABILITY IN WEATHER INDEX INSURANCE FOR AGRICULTURE AND RURAL LIVELIHOODS Lessons learned Index insurance was an unprecedented approach in Brazil. The size of the state, and consequently the differences in weather conditions, meant that assessment of municipalities by indices ensured greater precision in determining the main natural risk for each location. The area-yield index insurance programme was considered a successful public-private partnership. Four elements made this programme successful, and they are elements that are replicable in other programmes: • No need for upfront payment of the premium; • Strong marketing strategy; • Successful use of technology; and • Wider approach to rural and agricultural development. Involvement in this programme was commercially attractive, as private insurers could offer coverage to low-income farmers with the help of an approximately 90 per cent government subsidy of premium costs. It should be noted, however, that this level of financial support could be difficult to sustain in the long term. Farmer reaction to the programme was also encouraging. Out of the 195 surveys answered by participant farmers, 90 per cent were satisfied with AgroBrasil’s product and the cartoon booklet. Moreover, 73 per cent believed that the programme benefited from introduction of the AgroNet ® system, and that it provided speed, safety and a transparent process. This feedback, while encouraging, would be better supplemented by more rigorous monitoring, and an evaluation of a wider proportion of the client base could benefit development of the programme. Next steps As GRM ® is under the PTTS programme, it is subject to the state government’s financial and operational availability to perform technical evaluations and necessary changes to client profiles. The product’s future efficiency will require regular technical assessment of the population’s financial capacity, relative to the programme’s outcomes, and regular adaptation of the PTTS client portfolio. The expansion and sustainability of the programme will depend on the state’s financial capacity and political willingness to cover other regions, farmers and crops. AgroBrasil has indicated its interest in participating in other regions, and it has proposed inclusion of the insurance in other states’ programmes. Alternatively, the participation of other private companies in the initiative could provide additional distribution channels, making rates more affordable and leading to further scalability of the programme. ANNEX 151
Photographs Cover: Cover: WFP/Polaris/E. WFP/Polaris/E. Hockstein, page 12: IFAD/P.C. Vega, page 20: IFAD/P. IFAD/P. Wiggers, page 34: IFAD/P.C. Vega, page 52: IFAD/G.M.B. Akash, page page 58: Q. Shen, page 64: IFAD/P.C. Vega, page 74: IFAD/R. Chalasani, page 84: IFAD/P. Wiggers, page 96: IFAD/Q. IFAD/Q. Shen, page 104: IFAD/A. Hossein, page 120: IFAD/H. Yoshino, page 128: IFAD/C. IFAD/C. Sparacino, page 136: IFAD/P. Marchetti, page 144: IFAD/G. Bizzarri
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