scholarly journals The optimal drought index for designing weather index insurance

2020 ◽  
Author(s):  
Janic Bucheli ◽  
Tobias Dalhaus ◽  
Robert Finger
Keyword(s):  
Climate Change ◽  
Financial Risk ◽  
Drought Index ◽  
Risk Exposure ◽  
Drought Indices ◽  
Index Insurance ◽  
Weather Index ◽  
Weather Index Insurance ◽  
Risk Reducing ◽  
Reducing Potential

Abstract Climate change increases the need for better insurance solutions that enable farmers to cope with drought risks. We design weather index insurance using drought indices based on precipitation, soil moisture and evapotranspiration as underlying drought index and compare their risk-reducing potential for winter wheat producers in Eastern Germany. In general, we find that all drought indices can reduce financial risk exposure. However, the largest risk reduction can be achieved if the underlying drought index is tailored individually for each farm. This implies that insurers should offer insurance with farm-specific underlying drought index.

scholarly journals POSSIBILITY OF WEATHER-INDEX INSURANCE FOR CLIMATE CHANGE ADAPTATION IN NORTHEAST THAILAND

2017 ◽  
Vol 73 (5) ◽  
pp. I_377-I_383 ◽  
Author(s):  
Koshi YOSHIDA ◽  
Koki HOMMA ◽  
Masayasu MAKI ◽  
Keigo NODA ◽  
Hiroaki SHIRAKAWA ◽  
...  
Keyword(s):  
Climate Change ◽  
Climate Change Adaptation ◽  
Index Insurance ◽  
Northeast Thailand ◽  
Weather Index ◽  
Weather Index Insurance

Using a regional climate model to develop index-based drought insurance for sovereign disaster risk transfer

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Roman Hohl ◽  
Ze Jiang ◽  
Minh Tue Vu ◽  
Srivatsan Vijayaraghavan ◽  
Shie-Yui Liong
Keyword(s):  
Climate Model ◽  
Regional Climate ◽  
Meteorological Drought ◽  
Drought Indices ◽  
Index Insurance ◽  
Weather Index ◽  
Content Type ◽  
Risk Transfer ◽  
Central Java ◽  
Weather Index Insurance

PurposeExamine the usability of rainfall and temperature outputs of a regional climate model (RCM) and meteorological drought indices to develop a macro-level risk transfer product to compensate the government of Central Java, Indonesia, for drought-related disaster payments to rice farmers.Design/methodology/approachBased on 0.5° gridded rainfall and temperature data (1960–2015) and projections of the WRF-RCM (2016–2040), the Standardized Precipitation Index (SPI) and the Standardized Precipitation Evapotranspiration Index (SPEI) are calculated for Central Java over different time spans. The drought indices are correlated to annual and seasonal rice production, based on which a weather index insurance structure is developed.FindingsThe six-month SPI correlates best with the wet season rice production, which generates most output in Central Java. The SPI time series reveals that drought severity increases in future years (2016–2040) and leads to higher payouts from the weather index structure compared to the historical period (1960–2015).Practical implicationsThe developed methodology in using SPI for historical and projected periods allows the development of weather index insurance in other regions which have a clear link between rainfall deficit and agricultural production volatility.Originality/valueMeteorological drought indices are a viable alternative for weather index insurance, which is usually based on rainfall amounts. RCM outputs provide valuable insights into future climate variability and drought risk and prolong the time series, which should result in more robust weather index insurance products.

scholarly journals Toward the development of a weather index insurance for rice farmers in the coastal region of Myanmar

2021 ◽  
Author(s):  
Jun Furuya ◽  
Keisuke Omori ◽  
Hideo Aizaki
Keyword(s):  
Climate Change ◽  
Saltwater Intrusion ◽  
Coastal Region ◽  
Discrete Choice Experiments ◽  
Survey Method ◽  
Index Insurance ◽  
Target Area ◽  
Weather Index ◽  
Rice Farmers ◽  
Weather Index Insurance

AbstractClimate change is expected to exacerbate damage to agricultural production from natural disasters. Examination of measures to adapt to the damage represents an urgent matter for agriculture. A multidisciplinary research project aimed at providing effective information related to development a weather index insurance (WII) system was conducted for rice farmers in a coastal region of Myanmar to achieve sustainable rice farm management in the country, which is among the world’s poorest and most disaster prone. For lower income countries, WII is one adaptation measure to mitigate damage by climate change. Using remote sensing and statistical data, changes in tracks of cyclones in the Bay of Bengal, the duration of damage by cyclone disasters, and areas affected by saltwater intrusion were analyzed to ascertain risk levels for disasters in the target area: Labutta township in the Ayeyarwady region. Furthermore, demand analysis of WII using discrete choice experiments, a question-based statistical survey method, revealed that farmers’ demand of WIIs for cyclone landfall, flood, and drought is relatively greater than that for saltwater intrusion. This finding indicates that saltwater intrusion might not be a crucially important matter for farmers who cultivate rainfed rice, whereas inland water floods caused by cyclone landfall and drought caused for changing the weather patterns represent a threat for these farmers. Results of econometric model analysis for designing a WII indicate that if a regular farmer in the township were to pay 41.5 US dollars per year to purchase WII for flood damage, their expected income will be stable.

scholarly journals Evaluating Alternative Drought Indicators in a Weather Index Insurance Instrument

2019 ◽  
Vol 11 (3) ◽  
pp. 629-649
Author(s):  
Travis M. Williams ◽  
William R. Travis
Keyword(s):  
Main Product ◽  
Precipitation Index ◽  
Drought Indices ◽  
Index Insurance ◽  
Weather Index ◽  
Weather Index Insurance ◽  
Insurance Program ◽  
Complex Relationships ◽  
Production Losses ◽  
Test Correlation

Abstract Weather index insurance is a popular means of mitigating agricultural risks. Drought is a significant cause of lost agricultural production, and so precipitation index–based plans are common. Simple “percent of normal” indices are often used because they are easy to calculate and communicate to policyholders. However, the ability of such indices to reflect production losses is limited, reducing the ability of insurance to efficiently mitigate risk. This is especially true in rangeland livestock production given the cumulative effects of rainfall and other factors on range production and the complex relationships between range and livestock weight gain, which is the rancher’s main product and source of income. More sophisticated drought indices incorporate the complexities of drought into their design and would, in theory, serve as more appropriate payment triggers. This study uses a suite of drought indices to test correlation with production and the behavior of insurance based on those indices. Payout patterns based on each index were simulated within the actuarial framework of a precipitation-based insurance program aimed at livestock producers. Results were compared with the program’s precipitation index, showing that drought indices have higher correlations with range production, a tendency to incentivize growing-season protection, more even geographic distributions of risk, reduced policyholder ability to seek higher payments through strategic coverage choices, and increased provider ability to adjust payment patterns to reduce the risk of nonpayment given loss.

scholarly journals Contrasting Influences of Seasonal and Intra-Seasonal Hydroclimatic Variabilities on the Irrigated Rice Paddies of Northern Peninsular Malaysia for Weather Index Insurance Design

2021 ◽  
Vol 13 (9) ◽  
pp. 5207
Author(s):  
Zed Zulkafli ◽  
Farrah Melissa Muharam ◽  
Nurfarhana Raffar ◽  
Amirparsa Jajarmizadeh ◽  
Mukhtar Jibril Abdi ◽  
...  
Keyword(s):  
Pearson Correlation ◽  
Extreme Rainfall ◽  
Peninsular Malaysia ◽  
Coefficient Of Determination ◽  
Index Insurance ◽  
Weather Index ◽  
Basis Risk ◽  
Insurance Contracts ◽  
Weather Index Insurance ◽  
Streamflow Statistics

Good index selection is key to minimising basis risk in weather index insurance design. However, interannual, seasonal, and intra-seasonal hydroclimatic variabilities pose challenges in identifying robust proxies for crop losses. In this study, we systematically investigated 574 hydroclimatic indices for their relationships with yield in Malaysia’s irrigated double planting system, using the Muda rice granary as a case study. The responses of seasonal rice yields to seasonal and monthly averages and to extreme rainfall, temperature, and streamflow statistics from 16 years’ observations were examined by using correlation analysis and linear regression. We found that the minimum temperature during the crop flowering to the maturity phase governed yield in the drier off-season (season 1, March to July, Pearson correlation, r = +0.87; coefficient of determination, R2 = 74%). In contrast, the average streamflow during the crop maturity phase regulated yield in the main planting season (season 2, September to January, r = +0.82, R2 = 67%). During the respective periods, these indices were at their lowest in the seasons. Based on these findings, we recommend temperature- and water-supply-based indices as the foundations for developing insurance contracts for the rice system in northern Peninsular Malaysia.

scholarly journals Farmers’ Demand for Informal Risk Management Strategy and Weather Index Insurance: Evidence from China

2021 ◽  
Author(s):  
Yingmei Tang ◽  
Huifang Cai ◽  
Rongmao Liu
Keyword(s):  
Risk Management ◽  
Field Experiments ◽  
Management Strategies ◽  
Insurance Companies ◽  
Index Insurance ◽  
Insurance Demand ◽  
Weather Index ◽  
Weather Index Insurance ◽  
Risk Management Strategies ◽  
The Government

AbstractIn the absence of formal risk management strategies, agricultural production in China is highly vulnerable to climate change. In this study, field experiments were conducted with 344 households in Heilongjiang (Northeast China) and Jiangsu (East China) Provinces. Probit and logistic models and independent sample T-test were used to explore farmers’ demand for weather index insurance, in contrast to informal risk management strategies, and the main factors that affect demand. The results show that the farmers prefer weather index insurance to informal risk management strategies, and farmers’ characteristics have significant impacts on their adoption of risk management strategies. The variables non-agricultural labor ratio, farmers’ risk perception, education, and agricultural insurance purchase experience significantly affect farmers’ weather index insurance demand. The regression results show that the farmers’ weather index insurance demand and the influencing factors in the two provinces are different. Farmers in Heilongjiang Province have a higher participation rate than those in Jiangsu Province. The government should conduct more weather index insurance pilot programs to help farmers understand the mechanism, and insurance companies should provide more types of weather index insurance to meet farmers’ diversified needs.

Quantifying spatial basis risk for weather index insurance

2012 ◽  
Vol 14 (1) ◽  
pp. 20-34 ◽  
Author(s):  
Michael T. Norton ◽  
Calum Turvey ◽  
Daniel Osgood
Keyword(s):  
Index Insurance ◽  
Weather Index ◽  
Basis Risk ◽  
Weather Index Insurance
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