Geoscience Reference
In-Depth Information
truly successful if its pioneers manage to strike a balance between the complexity of
the model required for constructing the index and the simplicity and transparency
needed to effectively communicate its benefi ts to the producers. For example, fur-
ther research is required to evaluate the feasibility of using satellite data and weather
sensors to measure the impact of weather events on agricultural production.
Box 17.4 Index-Based Insurance
Following early and severe frosts in 2010, when growers lost approximately
1 m tonnes of beet without compensation, the UK's National Farmer's Union
(NFU) and British Sugar launched a sugar beet frost insurance scheme to
protect growers. The insurance is 'trigger-based', meaning that a trigger event
must have occurred before the cover is activated and losses can be claimed.
For an insurance claim to be calculated, the following must have occurred: (1)
the grower holds a valid certifi cate of insurance, (2) the frost trigger has been
hit and (3) the actual adjusted tonnage of beet yield achieved by the farmer is
less than 85 % of the insured (approved) tonnage of the farmer.
The trigger is hit when the rolling 10 day average minimum temperature at
one of the three named Met Offi ce weather stations is - 4 °C or lower. Based
on an analysis of historical temperature data, this trigger would have been hit
ten times in the last 62 years. The insurance product was designed so that
there is no requirement of 'proof of frost damage' at each farm, reducing the
burden on farmers. The cover value for each grower is up to only 50 % of the
value of the beet that was not delivered. It is therefore in all growers' interests
to deliver as much of their crop as possible. The cost of the frost insurance is
12.75 p per tonne.
17.7
Conclusion
Multidisciplinary research arising from partnerships between insurance, academia
and the public sector will drive innovation in risk management over the next few
decades. Population growth, urbanisation and high concentrations of people in vul-
nerable regions combined with intense competition for food, water and energy sup-
plies are likely to exacerbate environmental and social risks.
This will increase the demand for insurance-based solutions and catastrophe
programmes in particular, for managing risk in the face of environmental change.
A lack of infrastructure in developing countries suggests that alternative insurance
mechanisms, such as index-based insurance, offer a viable form of risk transfer.
Recent international legislation is focusing attention on the advantages of insurance
mechanisms for transferring and sharing risk equitably across local and global
scales. Support for prevention mechanisms, such as early warning systems, will also
Search WWH ::
Custom Search