Remote sensing in an index-based insurance design for hedging economic impacts on rice cultivation

Abstract

Abstract. Rice production in Ecuador is steadily affected by extreme climatic events that make it difficult for farmers to cope with production risk, threatening rural livelihoods and food security in the country. Developing agricultural insurance is a policy option that has gained traction in the last decade. Index-based agricultural insurance has become a promising alternative that allows insurance companies to ascertain and quantify losses without verifying a catastrophic event in situ, lowering operative costs and easing implementation. But its development can be hindered by basis risk, which occurs when real losses in farms do not fit accurately with the selected index. Avoiding basis risk requires assessing the variability within the insurance application area and considering it for representative index selection. In this context, we have designed an index-based insurance (IBI) that uses a vegetation index (normalized difference vegetation index – NDVI) as an indicator of drought and flood impact on rice in the canton of Babahoyo (Ecuador). Babahoyo was divided in two agro-ecological homogeneous zones (AHZs) to account for variability, and two NDVI threshold values were defined to consider, first, the event impact on crops (physiological threshold) and, second, its impact on the gross margin (economic threshold). This design allows us to set up accurate insurance premiums and compensation that fit the particular conditions of each AHZ, reducing basis risk.

Identification of Paddy Croplands and Its Stages Using Remote Sensors: A Systematic Review

“…From 2017 there is a spike in the number of published articles, with a drop in 2021. The years 2020 [ 5 , 8 , 9 , 26 , 43 , 47 , 55 , 56 , 57 , 58 , 59 , 60 , 61 , 62 , 63 , 64 , 65 , 66 , 67 , 68 ] and 2022 (until 20 October) [ 2 , 6 , 18 , 28 , 39 , 42 , 44 , 49 , 69 , 70 , 71 , 72 , 73 , 74 , 75 , 76 , 77 , 78 , 79 , 80 ] showed a higher number of articles published, 20 per year, which represents 16% of the total, 32% combined.…”

“…30 [2,4,5,7,13,16,17,24,49,61,[63][64][65]76,84,86,88,91,99,100,108,112,117,125,127,129,134,135] Enhanced Vegetation Index (EVI) 2.5…”

Preface: Remote sensing, modelling-based hazard and risk assessment, and management of agro-forested ecosystems

“…This special issue collects several papers that present an overview of risk management frameworks (Nastos et al, 2021) and provide several examples of their application. Particularly important is the role of the presented methods for the insurance sectors (Martín-Sotoca et al, 2019;Valverde-Arias et al, 2020): in a context of a changing climate, the use of insurance to protect the income of farmers will be crucial, especially in developing countries, which are particularly vulnerable to the changing climate and where the income from farming activities is the only source of income. Natural hazards, hydrology, and meteorology and climate sciences are often linked, and some of the papers included in the special issue confirm this close connection.…”

“…When dealing with index-based insurance, it is not only important to identify thresholds allowing a quantification of the damages, but it is also important to quantify the basis risk, as shown by Valverde-Arias et al (2020), who evaluate the use of remote sensing in an index-based insurance design for hedging economic impacts on rice cultivation. In this paper, a method is presented for a spatially based quantification of the basis risk and of the damages and economic impacts, which is fundamental for ascertaining and quantifying losses without the need of an in situ verification, thus reducing operative costs and making the use of insurance easier in several regions.…”

Bibliometric Network Analysis of Crop Yield Gap Research over the Past Three Decades

“…Against traditional destructive methods involving harvest and field counting on small areas, remote sensing technology utilizes the spectral reflection characteristics of crop canopies and soil surfaces related to crop yield [66]. Researchers combine remote sensing technology with crop models to estimate crop yield potential in yield gap studies [67]. Food security is also a prominent research direction in this field (Figures 7 and 8).…”