The Potential for Scale and Sustainability in Weather Index Insurance

Table of contents
ACKNOWLEDGEMENTS 5
ACRONYMS 6
EXECUTIVE SUMMARY 9
CHAPTER 1. RISK IN AGRICULTURE 13
The problem 13
Types of risk in agriculture 13
How risks are traditionally managed 15
Households and communities 15
Financial service providers and input suppliers 17
Private insurers 17
Governments and relief agencies 18
CHAPTER 2. WEATHER INDEX-BASED INSURANCE 21
Index insurance for disaster relief 23
Index insurance for development 24
Challenges for index insurance 26
Demand 26
Contract design and basis risk 29
Reinsurance 30
CHAPTER 3. KEY DRIVERS OF SUSTAINABILITY AND SCALABILITY
OF WEATHER INDEX INSURANCE
Create a proposition of real value to the insured, and offer insurance as part
33
of a wider package of services 36
Build the capacity and ownership of implementation stakeholders 39
Increase client awareness of index insurance products
Graft onto existing, efficient delivery channels, engaging the private sector
41
from the beginning 43
Access international risk-transfer markets 44
Improve the infrastructure and quality of weather data 45
Promote enabling legal and regulatory frameworks 48
Monitor and evaluate products to promote continuous improvement 49
CHAPTER 4. ROLES FOR GOVERNMENTS AND DONORS IN PROMOTING
THE SCALING UP OF INDEX INSURANCE 53
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