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Climate Effects on Rainfall Index Insurance Purchase Decisions

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  • Novak, James L.
  • Nadolnyak, Denis A.

Abstract

Rainfall Index (RI) insurance provides forage and hay producers with group risk protection against drought related losses. However, insurance premiums and risk protection are currently based on pooled weather data series and do not account for the impacts of specific climate phases, specifically the El Niño Southern Oscillation (ENSO), on local rainfall distribution. This analysis examines differences in the expected payoffs on the RI insurance under varying coverage levels based on probabilities of rainfall shortage during specific climate events at four Agricultural Experiment Stations in Alabama. Policy makers and producers are expected to benefit from the results that show the varying effects of climate on expected payouts from this insurance.

Suggested Citation

  • Novak, James L. & Nadolnyak, Denis A., 2010. "Climate Effects on Rainfall Index Insurance Purchase Decisions," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers, vol. 2010, pages 1-13.
    • Handle: RePEc:ags:jasfmr:96368
    DOI: 10.22004/ag.econ.96368
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    References listed on IDEAS

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    1. Miguel Carriquiry & Daniel E. Osgood, 2008. "Index Insurance, Probabilistic Climate Forecasts, and Production," Center for Agricultural and Rural Development (CARD) Publications 08-wp465, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    2. Martin, Steven W. & Barnett, Barry J. & Coble, Keith H., 2001. "Developing And Pricing Precipitation Insurance," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 26(1), pages 1-14, July.
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