The Potential for Scale and Sustainability in Weather Index Insurance

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CASE STUDY 1
AGROASEMEX IN MEXICO
Weather data provider
Prior to the launch of the second pilot, the National Water Commission (CONAGUA), which is
the public entity responsible for managing the weather stations, granted access to the historical
weather database and began producing a weekly electronic report with rain value updates.
2004-2008 scale-up
Scaling up of the weather insurance programme continued in the following years. In 2004,
some regions from Puebla State were incorporated, crop coverage was extended to barley,
and the insured area, number of weather stations and sum insured increased.
Since 2004, AGROASEMEX has continued to work to extend coverage. It offers
protection against drought and excess moisture for all four of the most important grains
in Mexican agricultural production: corn, beans, sorghum and barley. By 2008,
1.9 million ha were protected under the programme, distributed over 251 weather stations,
with a total sum insured of US$132.5 million and premiums of US$22 million, benefiting
approximately 800,000 low-income farmers.
Target group
The insurance is sold exclusively to the federal and state governments. The federal
Government purchases the product through its PACC programme. It decides which states
to cover and also responds to formal requests for assistance from state governments.
The target group consists of low-income rural producers, mainly with non-irrigated
crops. Of those who receive aid, 57 per cent have an income of less than US$74 per
month, while the remainder have monthly incomes fluctuating from US$75 to US$222.
Public policies state that, in the event of disaster, aid should go mainly to the most
marginalized regions (i.e. those with the lowest combined development in sociodemographic
variables, such as access to education, suitable housing and income).
In the period 2006-2007, 41 per cent of the regions supported were considered
highly marginalized.
Product information
Premium rates and subsidies
The premium rate depends on the degree of marginalization of the municipalities included
in the portfolio. The federal Government subsidizes 90 per cent of the premiums for those
municipalities with high marginalization, and 70 per cent for municipalities with low-tomedium
marginalization. The remaining percentage of both is funded by the relevant
state government.
Triggers
Every year AGROASEMEX evaluates and adjusts the trigger levels and/or the period
covered to improve payouts for the upcoming season. There are two triggers: drought and
excess rainfall. Trigger levels differ according to the crop, region and crop growth stages
(i.e. sowing, flowering and harvesting).