The Potential for Scale and Sustainability in Weather Index Insurance

THE POTENTIAL FOR SCALE AND SUSTAINABILITY IN WEATHER INDEX INSURANCE
FOR AGRICULTURE AND RURAL LIVELIHOODS
Conclusion
While not a panacea, index insurance holds great promise for improving the lives of
people for whom weather incidents can mean the difference between survival and
catastrophe. It will take work and, as this paper has indicated, careful thought and
management to be successful. With government and donor help, infrastructure can be
developed to create stable data and a rational market for index insurance. Once the
framework is in place, private insurers can step in to extend the market along existing
delivery channels, and to stabilize the risk through objective standards and
reinsurance. Ultimately, index insurance can not only be a profitable industry, it can
aid governments to make better choices about poverty and disaster management.
Interested governments and donors should begin by training and educating key
players in the idea of index insurance; and private insurers should begin developing
relationships with existing delivery channels. These steps will lay the groundwork for
a functioning market.
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