Feasibility Study for Macro and Meso-level Index Insurance - Dominican Republic
The recent path of Tropical Storm Isaac in September 2012 caused the destruction of plantain fields in the southern region. This situation forced the national authorities to provide in kind assistance (i.e. planting materials, fertilizers, cleaning labor, land preparation) to the most affected farmers. Although some insurers provide agriculture insurance, the Ministry of Agriculture does not have a pre-defined budget to tackle the negative effects caused by events in the agricultural sector while it faces significant contingent liabilities.
Project type:
Macro, Meso and Micro level index based insurance feasibility studies
Requesting Agency:
Ministry of Agriculture
Project rationale:
The Ministry of Agriculture of the Dominican Republic has requested assistance from the World Bank to assess the feasibility of macro and meso and level index based insurance.
Key achievements:
- At macro-level: The WB GIIF Team conducted a feasibility study for macro-level agriculture index-based insurance on the Hurricane Trajectory Index (HTI) and on the El Niño Southern Oscillation (ENSO) indicator. The study verified that HTI insurance is possible, and provided product design suggestions and pricing. For the ENSO insurance, the historic weather data is not sufficient to establish suitable correlation with agriculture losses in the country.
- At meso-level: The WB GIIF Team also assessed the feasibility of a meso level area yield index insurance for the national federation of cocoa growers based on historic production data, proved that it can work, and designed and priced a product . It did indicate, however, that risk mitigating measures (to protect against rats, birds and other pests for example) might have a more favorable cost-benefit ratio.
- In both cases, the team also provided recommendations for the organizational implementation of possible index insurance.
- To address shortcomings in the historic weather data and the density and distribution of the weather station network, the WB GIIF Team is producing a gridded weather database that calibrates historic satellite data with historic weather station data to provide a complete history of rainfall and temperature data for the last 30 years in both parts of the Hispaniola island (Dominican Republic and Haiti). This will allow to fine tune product design and pricing and provide the credibility desired by international reinsurers.
The WBG GIIF team has continued engagement in the Dominican Republic, launching a new project this year, supporting the creation, structuring, and management of the index insurance ecosystem necessary for long-term sustainability, via a public-private programmatic approach.
To date, workshops and trainings on index insurance have been delivered to key public and private stakeholders in the sector – insurance companies, farmers associations, climate data managers, banks and MFIs and for financial institutions. Currently, the team is in discussions with a local insurance company to provide one-on-one advisory services to develop an index insurance product. To date, product development has included data management, the development of a software application to automatically update the data grid, risk mapping of the ag-portfolios of five financial institutions, and field verification of the risk mapping, as well as preliminary modeling of a potential product.
Key stakeholders:
Various departments in the Ministry of Agriculture, Dominican Coffee Council (CODOCAFE), Cacao National Commission (CONACADO); National Institute of Hydraulic Resources (INDRHI); the National Office of Meteorology (ONAMET); Aseguradora Agropecuaria Dominicana S.A. (AGRODOSA Insurance Company),; USAID Dominican Republic
Contacts:
Fatou Assah
Program Manager
World Bank group
Tel: + 1 202 473 6160
Fassah@worldbank.org