Abstract
This article presents innovations in agricultural risk management for natural disasters, focusing on the role of weather derivatives and weather index insurance in developing agricultural risk management strategies. The success story of weather risk insurance in India demonstrates to the world, that organized markets for risk can emerge and finance agricultural losses. Currently, many developing countries are particularly exposed to natural disaster risk without the benefit of ex-ante structures to finance losses. Instead, following each major drought event or other natural disaster, those affected must appeal for financial support and are left vulnerable to the mercy of ad-hoc responses from donor governments. Livelihoods are rarely insured by international insurance or reinsurance providers, capital markets, or even government budgets in developing countries where natural disasters and agricultural price risk impede development of both formal and informal banking. Trapped into this cycle of institutional underdevelopment, poor, risk-averse farmers are locked in poverty, burdened with old technology and faced with an inefficient allocation of resources.
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Hess, U. (2007). Weather index insurance for coping with risks in agricultural production. In: Sivakumar, M.V.K., Motha, R.P. (eds) Managing Weather and Climate Risks in Agriculture. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-72746-0_22
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DOI: https://doi.org/10.1007/978-3-540-72746-0_22
Publisher Name: Springer, Berlin, Heidelberg
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