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 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. 59
60 References and resources Arce, C. 2009. Central America – A different approach for launching index insurance. In Hellmuth et al. 2009. Barnett, B.J., C.B. Barrett and J.R. Skees. 2008. Poverty traps and index-based risk transfer products. World Development 36 (10): 1766-1785. Binswanger, H.P., and D.A. Sillers. 1984. Risk aversion and credit constraints in farmers’ decision-making: A reinterpretation. Journal of Development Studies 20:5–21. Breustedt, G., R. Bokusheva and O. Heidelbach. 2008. Evaluating the potential of index insurance schemes to reduce crop yield risk in an arid region. Journal of Agricultural Economics 59 (2): 312-328. Dandekar, V.M. 1977. Crop insurance for developing countries. Teaching and Research Forum Paper No. 10. New York: Agricultural Development Council. Dercon, S. 2002. Income risk, coping strategies and safety nets. World Bank Research Observer 17 (2): 141-166. Dercon, S., with J. Hoddinott and T. Woldehanna. 2005. Shocks and consumption in 15 Ethiopian villages, 1999-2004, in Risk, poverty and vulnerability in Africa. Special issue, Journal of African Economies 14 (4) (December): 559-585. Fuente, A. de la, and S. Dercon. 2008. Disasters, growth and poverty in Africa: Revisiting the microeconomic evidence. Background paper for the 2009 ISDR Global Assessment Report on Disaster Risk Reduction. Geneva: International Strategy for Disaster Reduction. Gautam, M., P. Hazell and H. Alderman. 1994. Rural demand for drought insurance. Policy Research Working Paper No. 1383. Washington, DC: World Bank. Giné, X., R. Townsend and J. Vickey. 2008. Patterns of rainfall insurance participation in rural India. World Bank Economic Review 22 (3): 539-566. Giné, X., and D. Yang. 2008. Insurance, credit and technology adoption: Field experimental evidence. Journal of Development Economics 89:1-11. Grosh, M., C. del Ninno, E. Tesliuc and A. Ouerghi. 2008. For protection and promotion: The design and implementation of effective safety nets. Washington, DC: World Bank. Halcrow, H.G. 1948. The theory of crop insurance. Ph.D. diss. Chicago: University of Chicago. Hansen, J.W., M. Dilley, L. Goddard, E. Ebrahimian and P. Ericksen. 2004. Climate variability and the Millennium Development Goal hunger target. IRI Technical Report 04-04. New York: International Research Institute for Climate and Society (IRI), Columbia University.
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Contacts IFAD Francesco Rispoli f.r
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