Weather index insurance under CCAP A feasibility study Mangesh Patankar, Microinsurance Fellow at Philippines Crop Insurance Corporation Abbreviations ANTRECCO Agusan del Norte Teachers Retirees Communities Cooperative CARD Centre for Agriculture and Rural Development CCAP Climate Change Adaptation Project CLIMBS Coop Life Insurance and Mutual Benefit Services DA Department of Agriculture DOLE Department of Labour and Employment DTI Department of Trade and Industries ET Evapotranspiration FAO Food and Agriculture Organization GSIS Government Service Insurance Scheme GTZ German Technical Corporation IC Insurance Commission IGIDR Indira Gandhi Institute for Development Research ILO International Labour Organization IFAD International Fund for Agricultural Development IFPRI International Food Policy Research Institute LGU Local Government Unit MDG-F Millennium Development Goal-Fund NASA National Aeronautics and Space Administration NSO National Statistics Office OCD Office of Civil Defence OPV Open Pollination Variety OTOP One Town One Product PAGASA Philippine Atmospheric, Geophysical and Astronomical Services Administration PagIBIG Pagtutulungan sa Kinabukasan: Ikaw, Bangko, Industria at Gobyerno PCIC Philippines Crop Insurance Corporation RTR Remedios T. Romualdez SSS Social Security Scheme UN United Nations VBARD Vietnam Bank for Agriculture and Rural Development WFP World Food Programme WIBI Weather index based insurance Contents 1 Introduction .......................................................................................................................................... 5 1.1 Objective ....................................................................................................................................... 5 1.2 Methodology ................................................................................................................................. 5 1.3 Structure of the report .................................................................................................................. 6 2 Planned interventions under CCAP ....................................................................................................... 6 2.1 Priority areas identified under CCAP ............................................................................................ 7 2.2 Concept of weather index insurance ............................................................................................ 7 2.2.1 Benefits ................................................................................................................................. 8 2.2.2 Ideal Index ............................................................................................................................. 8 2.2.3 Challenges ............................................................................................................................. 8 3 Description of the Priority Areas ........................................................................................................... 9 3.1 Demographics ............................................................................................................................... 9 3.2 Land profile ................................................................................................................................... 9 3.3 Weather ...................................................................................................................................... 10 3.4 Livelihoods .................................................................................................................................. 10 3.5 Financial institutions ................................................................................................................... 11 3.6 Risk faced by farmers .................................................................................................................. 11 4 State of current risk management solutions in the proposed region ................................................. 12 4.1 Insurance ..................................................................................................................................... 12 4.1.1 Life insurance ...................................................................................................................... 12 4.1.2 Agriculture insurance .......................................................................................................... 13 4.1.3 Health Insurance ................................................................................................................. 13 4.2 Pension and other social security plans ...................................................................................... 14 4.3 Agriculture Guarantee Fund Pool (AGFP) ................................................................................... 15 4.4 Contingency Funds ...................................................................................................................... 15 4.5 Ex-post techniques ...................................................................................................................... 15 5 Product feasibility ............................................................................................................................... 15 5.1 Analysis of weather data availability and validity ....................................................................... 16 5.2 Choosing among micro, meso and macro policies ..................................................................... 17 5.3 Crops and crop parameters ........................................................................................................ 18 5.3.1 Rice ...................................................................................................................................... 18 5.3.2 Corn ..................................................................................................................................... 19 5.3.3 Reference Evapotranspiration ............................................................................................ 20 5.3.4 Crop coefficients and yield coefficients for corn and rice .................................................. 20 5.4 Analysis of crop yield loss data availability and validity ............................................................. 21 5.5 Review of literature on schemes in similar areas ....................................................................... 22 6 Market assessment ............................................................................................................................. 23 6.1 Client education .......................................................................................................................... 23 6.2 Capacity assessment of insurer and aggregators ....................................................................... 23 6.3 Regulatory environment ............................................................................................................. 24 7 Recommendations .............................................................................................................................. 24 7.1 Proposed nature of the contracts ............................................................................................... 24 7.2 Correlations with actual losses ...................................................... Error! Bookmark not defined. 7.3 Pilot areas.................................................................................................................................... 26 7.4 Feasibility of offering joint products ........................................................................................... 27 7.5 Phased approach ......................................................................................................................... 27 7.6 Incorporating Climate Change Scenarios from PAGASA ............................................................. 28 References .................................................................................................................................................. 30 Annexure 1: Feasible areas that could be covered ..................................................................................... 32 Annexure 2: CCAP priority municipality locations ...................................................................................... 33 Annexure 3: Input costs and income for corn and rice ............................................................................... 34 Annexure 4: Partners of ILO under CCAP .................................................................................................... 36 Annexure 5: Yield for Rice and Corn – Agusan del Norte ........................................................................... 37 Annexure 6: Major floods in Butuan City .................................................................................................... 39 Annexure 7: Rice claims data for Agusan del Norte ................................................................................... 41 1 Introduction This document discusses feasibility of implementing Weather Index Based Insurance (WIBI) pilot under Climate Change Adaptation Project (CCAP) in a select few sites in Agusan del Norte, a province of Caraga region on Mindanao islands of Philippines. CCAP is a part of a larger initiative named “Joint Programme on Strengthening the Philippines’ Institutional Capacity to Adapt to Climate Change” implemented