Parametric rice-yield index crop insurance in the Philippines

by Artemis on November 9, 2010

New, different approaches to microinsurance for farmers are appearing at an increasing speed with the Philippines seemingly being one of the markets where innovative attempts to create affordable, index-linked agricultural insurance are happening.

The German Agency for Technical Cooperation (GTZ) is introducing a new parametric microinsurance product for rice farmers within 17 municipalities of Leyte and Southern Leyte. The scheme targets 5,000 poor farmers in the region and is being undertaken through GTZ’s Enhancement of Food Security in the Visayas (EFOS) project.

The scheme is seeking to design a new type of crop insurance called Area Based Yield Index Insurance (ARBY) which uses indices to determine payments to farmers. ARBY is a parametric product which compares the current rice yield of an entire irrigation system with the average yield of the last 15 years. Farmers will receive payouts once the yield falls compared to the 15 year average.

If successful the scheme will be expanded to more areas in an attempt to increase the amount of farmers with insurance from the current 2% of total rice farmers (which shows just how low insurance penetration is).

It’s interesting as this product is taking a different approach to many of the index-linked microinsurance efforts which use weather for an indices. Taking the crop yield may actually provide better cover to the farmers as it cuts across more types of peril or weather event than products which use rainfall and drought conditions as their trigger.

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