An analysis of rainfall weather index insurance: the case of forage crops in Canada
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Date
2016
Authors
Simpson, Alexa
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Abstract
This study analyzes rainfall weather index insurance used for forage crops, in the Province of Ontario, Canada. The first objective of the study was to examine factors affecting the willingness of farmers to pay for forage rainfall index insurance, and a survey was undertaken. Some factors found to influence farmers' willingness to pay were knowledge and attitude regarding insurance, their risk profile, and socio-economic factors. A second objective of the study was to examine basis risk reduction approaches. Basis risk is the difference between the actual loss on a farm and the index measured loss payments that are determined by weather station data. The focus was to capture changing yield and weather relationships over crop growth stages. Using farm level forage yield and daily weather station data from Ontario, a multi-trigger index was designed using weighted crop cycle optimization, and results show that basis risk was substantially reduced.
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Keywords
Weather index insurance, Basis risk, Canada