Dealing with drought in irrigated agriculture through insurance schemes: an application to an irrigation district in Southern Spain

Abstract

Hydrological drought is expected to have an increasing impact on both crop and fruit yields in arid and semi-arid regions. Some existing crop insurance schemes provide coverage against water deficits in rain-fed agriculture. The Prevented Planting Program in the USA covers against drought for irrigated agriculture. However, drought insurance for irrigated agriculture is still a challenge for companies and institutions because of the complexity of the design and implementation of this type of insurance. Few studies have attempted to evaluate the risk of loss due to irrigation water scarcity using both stand-alone production functions and crop simulation models. This paper's contributions are that it evaluates the suitability of AquaCrop for calculating drought insurance premiums for irrigated agriculture and that it discusses contract conditions and insurance design for hydrological drought risk coverage as part of a traditional insurance product, with on-field loss assessment in combination with a trigger index. This method was applied to an irrigation district in southern Spain. Our insurance premium calculation showed that it is feasible to apply this method provided that its data requirements are met, such as a large enough set of reliable smallscale yield and irrigation time series data, especially soil data, to calibrate AquaCrop. The choice of a trigger index should not be underestimated because it proved to have a decisive influence on insurance premiums and indemnities. Our discussion of the contract conditions shows that hydrological drought insurance must comply with a series of constraints in order to avoid moral hazard and basis risk.Additional key words: crop insurance; hydrological drought; AquaCrop; trigger index. This work has one supplementary table published online alongside the electronic version of the article.

Effects of regulated deficit irrigation on physiology, yield and fruit quality in apricot trees under Mediterranean conditions

“…Mediterranean regions are characterized by the shortage of water resources (Ruiz et al, 2015). This situation is aggravated by the strong competition for water between agriculture and other users such as industry or increasing population.…”

Insuring Water Supply in Irrigated Agriculture: A Proposal for Hydrological Drought Index-Based Insurance in Spain

“…In these river basins, it is very difficult to set an appropriate time frame for drought insurance. This is the case with the basins located in southern Spain [48], as well as in most of the basins in Mediterranean and semiarid developed countries. In these inertial systems, if the amount of water stored at the beginning of the hydrological year (in October, when reservoirs reach their lowest water levels after the dry summer) is 'normal' (similar to the average for this month), there is typically zero probability of a water supply gap in that hydrological year.…”

Hydrological drought index insurance for irrigation districts in Spain

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