Developing Parametric Insurance for Weather Related Risks for Indonesia
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World Bank, Washington, DC
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Indonesia is one of the main agriculture
producers globally and largely relies on domestic staples
for its growing population. Projections of climate change
models for Indonesia point towards increasing temperatures
and more extreme distributions of precipitation with more
frequent dry and wet periods. The Government of Indonesia
(GoI) has been focusing on modernizing rice production
through improved irrigation infrastructure and early warning
systems to better cope with developing droughts and support
schemes for rice farmers. While governments use risk
transfer solutions mostly for infrastructure, parametric
insurance covers have become increasingly available for
agriculture assets including crops, livestock, and forestry.
This study investigates the development of a parametric
insurance product as an ex ante risk management instrument
that relies on regional drought indices and provides
province-level payouts to the GoI in case of severe
droughts. As a case study, the province of Central Java has
been chosen given its importance in rice production and a
recent request of the Central Java Government to transfer
drought risk. This study uses over 50 years of historical
gridded precipitation and temperature data to develop
standard precipitation indices (SPI) and standard
precipitation evapotranspiration indices (SPEI) to quantify
drought extents at a resolution of 50 x 50 km. Preliminary
results of this study have been shown and discussed with the
Ministry of Agriculture of Central Java, the National
Weather Service of Indonesia (BMKG), the Office of the
Insurance Regulator, the Ministry of Finance, and leading
Indonesian insurers in the form of workshops undertaken in
Indonesia (Semarang and Jakarta) in July 2017. The
availability of longer seasonal rice production data will
improve the validation of the developed indices.
Palabras clave
RICE PRODUCTION, NATURAL DISASTER, CATASTROPHE INSURANCE, DROUGHT, CLIMATE CHANGE, DISASTER RISK, CLIMATE CHANGE ADAPTATION, WEATHER FORECASTING, EXTREME WEATHER, AGRICULTURAL FINANCE, PRECIPITATION INDEX, RAINFALL, RISK MANAGEMENT