Document / Publication
Rainfall-related hazards—deficit rain and excessive rain—inevitably stress crop production, and weather index insurance is one possible financial tool to mitigate such agro-metrological losses. In this study, the authors investigated where two rainfall-related weather indices—anomaly-based index (AI) and humidity-based index (HI)—could be best used for three main crops (rice, wheat, and maize) in China’s main agricultural zones.
Based on insurable counties, this article provides systematic evaluation criteria to analyze the weather index, which includes the number of insurable counties, the magnitude of basis risk, independent yield loss, and the effectiveness of risk pooling for each portfolio of weather index, hazard, and agricultural zone. The results reveal that the application of weather index-based insurance (WII) should be localized and diversified because one single weather index could not meet all criteria and also could not work for all regions and weather-related hazards.
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