Climate Change Adaptation in Mixed Crop-Livestock Systems in Developing Countries

Where and how index insurance can boost the adoption of improved agricultural technologies

Index insurance is often promoted as a solution to many of the barriers that are thought to limit the supply of formal insurance coverage to smallholder farmers and livestock owners in developing countries. This manuscript summarizes the state of index insurance, paying special attention to the key challenges facing index insurance if it is to become a more effective tool for development. We then offer recommendations to tackle those challenges by strategically investing in a set of public goods and services geared towards addressing key informational gaps and improving the quality of index insurance products around the world.

Agricultural Index Insurance for Development

Insurance Against Poverty  Stefan Dercon (eds)  UNU-WIDER Studies in Development Economics Oxford University Press, 2005  465 pp.  ISBN 0199276838

	Reducing risk-related vulnerability has moved up on both national and international development agendas, with major agencies such as the World Bank or the Asian Development Bank designing social protection programmes aimed at providing more secure living conditions in developing countries. Written by eminent economists, this book addresses the following three key questions: How important is risk for poverty? What lessons can be learned from studying existing, often informal, risk-sharing institutions for the design of broad-based social protection? What is the scope for designing new instruments for social protection?

	Alternating between theoretical arguments and case studies, contributions addressing the first question insist on the...

Insurance Against Poverty

http://www.impactinsurance.org/sites/default/files/repaper26.pdf

The Demand for Microinsurance: A Literature Review

Unlike conventional insurance, which indemnifies policyholders for verifiable production losses arising from multiple perils, index insurance indemnifies policyholders based on the observed value of a specified 'index' or some other closely related variable that is highly correlated with losses. Index insurance exhibits lower transaction costs than conventional insurance, potentially making it more affordable to the poor in the developing world. However, it also offers less effective individual risk protection. This article provides a review of recent theoretical and empirical research on index insurance for developing countries and summarizes lessons learned from index insurance projects implemented in the developing world since 2000. Copyright 2012, Oxford University Press.

Index Insurance for Developing Countries

A heterogeneous agent model of credit-linked index insurance and farm technology adoption

Growth in the Federal crop insurance program, as well as in the use of crop insurance in de- veloping countries, highlights the policy importance of insurance as a risk-management tool for farmers. This report presents a new approach to the analysis of demand for crop insur- ance, which can better explain observed insurance coverage decisions among U.S. farmers and inform future discussion about crop insurance provisions in the Farm Bill. The findings indi- cate that when farmers have access to other financial mechanisms—primarily savings—their insurance decisions change. In addition, when researchers consider the element of time—for example, a farmer’s consideration of many crop seasons when making production and risk management decisions—predictions about farm-level demand for crop insurance will also change. Specifically, the authors find that, with savings, relatively wealthier farmers appear to spend less on insurance and self-insure through savings, while limited-resource farmers with low farm income use savings to increase insurance coverage. The more time a farmer factors into the decisionmaking process when comparing insurance versus savings for risk manage- ment, the less important insurance becomes. ---- Errata On August 11, 2016, a correction was made to the first sentence of the second paragraph of page 1. The original report stated the Federal Crop Insurance Reform Act (FCIRA) was passed in 1995, when, in fact, the Act was passed in 1994. While the changes to farm insurance as a result of FCIRA took effect in 1995, FCIRA became law in 1994.

How Do Time and Money Affect Agricultural Insurance Uptake? A New Approach to Farm Risk Management Analysis

The United States leads efforts to improve global food security, providing about half of global food aid. Global food security has improved over the past 15 years, but challenges and opportunities remain. ERS researchers recently analyzed the roles of trade, agricultural productivity, safety nets, and better data and measurement in achieving these gains.

Progress and Challenges in Global Food Security

A significant volume of research has investigated input subsidy programs in Africa, where government expenditures on such programs are non-trivial. This paper uses panel data from a sample of farm households in Zambia to compare how fertilizer use decisions change in the presence of a formal insurance market. If returns to fertilizer improve under an insurance regime, the use of index insurance can be an alternative to or complement of existing input subsidy programs in the country. After estimating the cost of a simple zero-one, actuarially fair index insurance product that is mandatory for farmers who purchase fertilizer, we run simulations to explore the effect of insurance on household investment in fertilizer. Results show that index insurance, by reducing the disposable wealth of households in years where no payouts occur, can dampen demand for fertilizer at the farm level.

Katie Farrin

Papers

Index Insurance for Developing Countries

A heterogeneous agent model of credit-linked index insurance and farm technology adoption

How Do Time and Money Affect Agricultural Insurance Uptake? A New Approach to Farm Risk Management Analysis

Progress and Challenges in Global Food Security

The Effect of Index Insurance on Returns to Farm Inputs: Exploring Alternatives to Zambia's Fertilizer Subsidy Program