This paper analyzed the applicability of two sets of rainfall indices for a weather index-based crop insurance (WIBCI) for rice against low rainfall cover in Dumangas, Iloilo, WS2013. WIBCI is a new type of risk-transfer-mechanism (RTM) being tested in the Philippines that operates on the principle of having pre-agreed indices set per weather variable between the insurer and insured. Claims happen when these indices are considered breached or are not met in the case of low rainfall cover for a particular period. Operation-wise, the WIBCI product is revolutionary and could be a potentially quick-responsive climate change adaptation measure. However, new as it is, questions on the applicability of the product, particularly the indices, have to be evaluated and scrutinized. Validation points used in this study were breach assessments via the WIBCI product's procedure and its consistency with actual drought incident reports. Average yields of the community relative to WIBCI farmers' individual yields were also used to validate consistency of breaches or no breaches among enrolees. Results of yield analysis relative to each community's average yields showed 95.7% of enrolees have low yields. When matched with the breaches assessed using the existing indices, only 52 enrolees breached the indices. Overall validity of the existing index via consistency of breached indices with low yields was only 70% but the 30% mismatch was still significant from an insurance business standpoint hence, a postulated set of indices specific to the location were developed for comparison. With the postulated indices, only 20 enrolees breached the indices which were much lower in number arid more acceptable considering the absence of PAGASA's official drought incident reports. However, consistency analysis revealed that a much higher basis risk was incurred when using the postulated index which was mostly due to the mismatch of no breaches and low actual grain yields.
Capistrano, AOV; Quilang, EJP
Rainfall Indices for a Weather Index-Based Crop Insurance for Rice
Philippine Journal Of Crop Science