Pricing of Rainfall Index Insurance for Rice and Wheat in Nepal

Authors
M. P. Poudel 1
S. E. Chen 2
W. C. Huang 2
1 Government of Nepal, Ministry of Agricultural Development, Department of Agriculture, Harihar Bhawan, Lalitpur, Nepal.
2 Department of Agribusiness Management, National Pingtung University of Science and Technology 1, Shuefu Road, Neipu, Pingtung 912, R.O.C., Taiwan.
Abstract
The adverse effect of climate change on agriculture has increased the importance of weather index insurance, particularly in developing countries. By using several econometric models, this study estimated the price and evaluated its effectiveness in rainfall index insurance for rice and wheat in Nepal. Crop yields associated with seasonal rainfall in three crop reporting districts were applied for actuarial estimation. The primary findings suggest that well designed weather index insurance is helpful to reduce the yield risk and stabilize farm income for rice, but results vary across crops and districts. The study results imply that rainfall index insurance is a promising insurance product, particularly for rice. Implementation of rainfall index insurance could increase the investment in cereal production in Nepal.

Keywords

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Journal of Agricultural Science and Technology
Volume 18, Issue 2
March and April 2016
Pages 291-302