ALM UNDP

Summary:

Executive Summary

This is the third in a series of State of Knowledge Reports (SKRs), produced by GlobalAgRisk, regarding various aspects of weather index insurance. The first SKR focused on data challenges that face many weather index insurance products and how those data challenges vary for different types of products and different target markets. The Data SKR also assessed the status of emerging data technologies and scientific advances that may one day reduce the need for significant investments in weather station infrastructure. Weather stations are sparse and difficult to maintain in many lower income countries. The second SKR focused on legal issues associated with weather index insurance.

This SKR focuses on developing markets for weather index insurance. Three general recommendations emerge from this SKR and the preceding reports in this series.

1. From the outset, projects supporting index insurance must formulate evaluation strategies related to targeted development objectives. When derived from a clearly defined causal theory of change, these strategies can aid investment and expansion decisions.
2. Rather than providing premium subsidies, donor and government funds should be used to invest in building local capacity and establishing the proper institutional frameworks that can support the development and growth of index insurance markets in lower income countries.
3. To address challenges in the market development process, product design should focus on: a. Starting with products for risk aggregators; b. Insuring against the broader economic consequences of weather risk, not just direct losses; c. Insuring against low‐frequency, catastrophic risks; and d. Reducing costs and adding value through innovative design and delivery features.