Index Insurance: A Viable Solution for Irrigated Farming?

Abstract

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

An analysis of the demand and uptake of agricultural insurance in developing countries

“…The uptake of weather index insurance is higher among male farmers in Ghana Lanka because the rainfall data is not available timely (Wickramasinghe 2019). Both the irrigation and rainfall variables have interacted in the crop plantation, but the current index insurance product in Sri Lanka is based solely on rainfall-which presents various complications and increases the basis risk (Arandara et al 2019)-and neither irrigation nor rainfall could be included within the index. The product relies on a variety of data sources, but the limitations of the data infrastructure constrain the development of a robust product (Arandara et al 2019).…”

“…Both the irrigation and rainfall variables have interacted in the crop plantation, but the current index insurance product in Sri Lanka is based solely on rainfall-which presents various complications and increases the basis risk (Arandara et al 2019)-and neither irrigation nor rainfall could be included within the index. The product relies on a variety of data sources, but the limitations of the data infrastructure constrain the development of a robust product (Arandara et al 2019). Indemnity insurance requires crop loss to be evaluated, but evaluations are costly and time-consuming (Wickramasinghe 2019).…”

Hydrological Drought-Indexed Insurance for Irrigated Agriculture in a Highly Regulated System

“…There are studies related to indexed insurance in irrigation districts using various index types, such as the river flow accumulations index [33], the Standardized Precipitation Index (SPI) [34], and drought indexes established in the river basin management plan [35,36], the volume of water stored in reservoirs [31,37], or a combination of rainfall and the water storage available for irrigation [38].…”