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
Since then, the central and provincial governments have supported farmers through
premium subsidies for a national multi-peril crop insurance (MPCI) programme, which has
been scaled up rapidly. The programme covers a variety of crops for risks including
rainstorms, flooding, waterlogging (oversaturation), strong winds, hail, frost, disease, pests
and rodents.
Despite these encouraging developments, MPCI has already generated some
challenges. Time-consuming and potentially inaccurate loss adjustment procedures have
led insurers (and the Government to some extent) to express their interest in investigating
alternative solutions.
Index insurance pilot
A joint index insurance pilot was launched in 2008 by WFP, IFAD and the Ministry of
Agriculture. It was the first time index insurance had been piloted in China, and the
programme aimed to test its viability as a supplement or alternative to MPCI.
Geographical coverage
Anhui Province was chosen as the pilot area. Located in the centre of China, Anhui is one
of the primary grain production provinces of the country, with the principal crop being rice.
The Ministry initially chose the counties of Changfeng for drought and heatwave and
Huaiyuan for waterlogging. Both have higher-than-average levels of rural poverty. In the
end, however, the Huaiyuan pilot was only simulated owing to time constraints. 32
Target group and crops
The policy covered the entire rice crop of the 482 households in Yanhu village in Chengfeng,
protecting 85 ha of rice with a total insured value of US$56,000 and with a premium of
US$2,000. Under the group insurance policy, each individual household is insured
according to its actual plot size, at 300 Chinese yuan (RMB) (US$50) per 0.07 ha, which
roughly equals input costs. Plot sizes vary from 0.04 to 0.5 ha.
Principal stakeholders and delivery channels
The pilot programme took place thanks to the involvement and commitment of
stakeholders at all levels and across diverse, relevant sectors. IFAD, WFP and the Ministry
of Agriculture were the principal project management partners. IFAD and WFP implemented
the training of Chinese stakeholders. Their consultants led development of the index and
design of the contracts, in consultation with local stakeholders and the WFP country office.
The Research Institute of Meteorological Science, Anhui, undertook the task of index
calculation and reporting.
The Institute of Environmental and Sustainable Development in Agriculture (IEDA), within
the Chinese Academy of Agricultural Sciences (CAAS), was appointed by the Ministry to
32 Changfeng and Huaiyuan had higher-than-average levels of rural poverty relative to the rest of the country and
to Anhui Province. Changfeng was one of the 592 national poverty counties, i.e. the poorest counties in China,
and Huaiyuan’s per capita income in rural areas was RMB 3,200 (US$544) in 2007, while the average for Anhui
was RMB 3,500 (US$595) and the national average was RMB 4,140 (US$704).
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