Index-based weather insurance for developing countries: A review of evidence and a set of propositions for up-scaling
Alain de Janvry (),
Elisabeth Sadoulet () and
Additional contact information
Sarris Alexandros: University of Athens
No P111, Working Papers from FERDI
Index-based weather insurance is a major institutional innovation that could revolutionize access to formal insurance for millions of smallholder farmers and related individuals. It has been introduced in pilot or experimental form in many countries at the individual or institutional level. Significant efforts have been made in research to assess its impacts on shock coping and risk management, and to contribute to improvements in design and implementation. While impacts have typically been positive where uptake has occurred, uptake has generally been low and in most cases under conditions that were not sustainable. This paper addresses the reasons for this current discrepancy between promise and reality. We conclude on perspectives for improvements in product design, complementary interventions to boost uptake, and strategies for sustainable scaling up of uptake. Specific recommendations include: (1) The first-order importance of reducing basis risk, pursuing for this multiple technological, contractual, and institutional innovations. (2) The need to use risk layering, combining the use of insurance, credit, savings, and risk-reducing investments to optimally address different categories of risk. For this, these various financial products should be offered in a coordinated fashion. (3) Calling on a role for state intervention on two fronts. One is the implementation of public certification standards for maximum basis risk of insurance contracts; the other is “smart” subsidies for learning, data accumulation, initial re-insurance, and catastrophic risks. (4) Using twin-track institutional-level index insurance contracts combined with intra-institution distribution of payouts to reduce basis risk and improve the quality of insurance. For this, credible intra-institutional rules for idiosyncratic transfers must be carefully designed. Finally (5), the need for further research on the determinants of behavior toward risk and insurance, the design of index-based insurance products combined with others risk handling financial instruments, and rigorous impact analyses of on-going programs and experiments.
JEL-codes: O16 Q12 Q14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr, nep-ias and nep-mfd
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14) Track citations by RSS feed
Downloads: (external link)
http://www.ferdi.fr/sites/www.ferdi.fr/files/publi ... _insurance_web_0.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.ferdi.fr/sites/www.ferdi.fr/files/publication/fichiers/wp111_index_insurance_web_0.pdf [301 Moved Permanently]--> https://ferdi.fr/sites/www.ferdi.fr/files/publication/fichiers/wp111_index_insurance_web_0.pdf)
Working Paper: Index-based weather insurance for developing countries: A review of evidence and a set of propositions for up-scaling (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:fdi:wpaper:1800
Access Statistics for this paper
More papers in Working Papers from FERDI Contact information at EDIRC.
Bibliographic data for series maintained by Vincent Mazenod ().