Weather index insurance for coping with risks in agricultural production

Water Freedom System

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Ulrich Hess

22.1 Introduction 377

22.1.1 Are there any effective precedents for agricultural insurance mechanismsin developing countries? 377

22.1.2 Is this kind of insurance only suitablefor large-scale commercial farmers? 378

22.1.3 Is India's insurance program sustainable? 378

22.2 Risk and Risk Management in Agriculture 379

22.2.1 Informal risk management mechanisms 380

22.3 Crop Insurance Programs in Developed Countries 383

22.3.1 tte United States 384

22.3.2 Canada 385

22.3.3 Spain 386

22.3.4 Experiences of developed countries provide inadequate models for developing countries 387

22.4 Weatherindexinsurancealternatives 388

22.4.1 Basic characteristics of an index 388

22.4.2 Structure of index insurance contracts 389

22.4.3 Relative advantages and disadvantages of index insurance 391

22.4.4 ttetrade-offbetweenbasisriskandtransactioncosts 391

22.4.5 Where index insurance is inappropriate 392

22.5 Application of weather index insurance in developing countries:

tte role of government 393

22.5.1 Premise: tte concept of risk layering 393

22.5.2 Policyinstruments 395

22.6 Overview of ongoing agricultural risk pilot programs 400

22.6.1 India 400

22.6.2 Malawi 401

22.7 Conclusions 403

References 404

23 Weather Risk Insurance for Coping with Risks to Agricultural Production

Pranav Prashad

23.1 Weather and Indian Agriculture 407

23.2 IntroductiontoWeatherlnsurance 407

23.2.1 Processofmakinganindexbasedproduct 407

23.3 Advantages of Index based Insurance products likeWeatherlnsurance 409

23.4 Initiatives in Weather Insurance 409

23.5 Innovative ways to reach to the hinterland - reduction of basis risk. . . . 410

23.6 Designing Crop and situation specific products 410

23.6.1 Wheat 410

23.6.2 Apples 411

23.6.3 Salt manufacturing 412

23.7 Snapshot of 2005-2006 412

23.8 Distribution: a key challenge 412

23.9 Conclusions 414

24 Contingency planning for drought - a case study in coping with agrometeorological risks and uncertainties

Roger C Stone, Holger Meinke

24.1 Introduction 415

24.2 tte basis of drought contingency planning 416

24.3 Preparednessstrategies 422

24.4 Risk management systems and tools 426

24.5 Issues associated with contingency planningfor drought underclimatechange 428

24.6 Conclusions 430

References 430

25 Agrometeorological services to cope with risks and uncertainties

Raymond P. Motha, V.R.K. Murthy

25.1. Introduction 435

25.2 Weather, Natural Disasters, and Agriculture 435

25.2.1 Fundamentalimportanceofweatherinagriculture 436

25.2.2 Impact of natural disasters in agriculture.rangeland, forestry, andenvironment 436

25.2.3 tte role oflndigenous Technical Knowledge (ITK)

in agrometeorological services 439

25.2.4 tte role of contemporary technological advancesin agrometeorologicalservices 441

25.3. Operational Agrometeorological Services to Cope with Risks and Uncertainties ofNatural Disasters 444

25.3.2 India 447

25.4 Strategies to Improve the Agrometeorological Servicesto Cope with Risks and Uncertainties 449

25.4.1 Improvingtheagrometeorologicalservices 450

25.4.2 Improving the support systems of agrometeorological services. . . 456

25.4.3 A comprehensive agrometeorological service strategyto cope with risks and uncertainties 458

25.5 Conclusions 459

References 460

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