Index-based insurance for income stabilization for smallholder farms in Central Asia
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Citation
Ihtiyor Bobojonov, Aden A. Aw-Hassan, Chandrashekhar Biradar, Aziz Nurbekov. (18/3/2015). Index-based insurance for income stabilization for smallholder farms in Central Asia. Paris, France.
Abstract
Climate change is one of the major challenges for agricultural producers worldwide. In Central Asian countries,
climate-driven irrigation water variability is a major source of risk. Future projections indicate even further
increase of production volatility in the region. Lack of financial mechanisms and high production risks are
major challenges hindering investment into climate smart technologies. Agricultural insurance therefore could
play an important role for reducing income volatility and create environment conducive to investment in the
region. However, current premium rates in the region (e.g. Kazakhstan and Uzbekistan) are very high,
associated with high operation and maintenance costs of the insurance companies. Insurance companies
explain the high operation costs by sparse and remote location of fields and need for several visits during the
vegetation period to reduce the moral hazard problem. Index-based insurance could help reducing the costs
associated with field visits as well as challenges associated with information asymmetry. However, suitability
of such insurance products is not tested in the region.
This study analyses the suitability of several index-based insurance tools to reduce income volatility in Central
Asia. Long-term yield records were available from five case study farms in different agroecological zones
(AEZs) of Central Asia. Index taken from remote sensing (NDVI, climate data) and climate stations as well as
irrigation water supply are used to design insurance products for wheat growers in Central Asia. Overall
analysis show that remote sensing based index insurance could serve as an important measure to reduce
income volatility and create favorable environment for investment in the region.
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Author(s) ORCID(s)
Aw-Hassan, Aden A. https://orcid.org/0000-0002-9236-4949
Biradar, Chandrashekhar https://orcid.org/0000-0002-9532-9452
Biradar, Chandrashekhar https://orcid.org/0000-0002-9532-9452