Agricultural Insurance Revisited: New Developments and Perspectives in Latin America and the Caribbean

Topic :

The introduction to this paper states that agricultural insurance is emerging as a topic of interest to farmers, policy makers, insurance companies, and development finance institutions in Latin America and the Caribbean after a long hiatus – with agricultural insurance being more widespread in Latin America and other developing regions of the world during the 1960s and 1970s. During the intervening period, financial difficulties encountered meant most of the programs were either scaled back or completely closed.

This paper focuses on production risk management, explaining key concepts, understanding why crop insurance markets have been slow to develop, and making recommendations about how to build sustainable markets in developing country contexts.

The challenge, noted in the paper, is to overcome obstacles and deliver efficient and sustainable agricultural insurance products. The principle obstacles highlighted and discussed in the paper are lack of quality information, inadequate regulatory frameworks, weak supervision, lack of actuarial expertise, lack of professional expertise in designing and monitoring agricultural insurance products, a mass of low-income, dispersed clients, who may not be willing or able to pay actuarially sound premiums for multiple peril products, and the tendency of governments to undermine market development through inappropriate use of subsidies and disaster relief funds.

Case studies on Uruguay, the Dominican Republic, and Peru are used to show how crop insurance products are evolving and/or what government-supported initiatives are under the way to expand coverage. Recommendations of how to build markets step-by-step and the importance of applying new technology to lower costs are also made.

The author states that the purpose of this paper is to provide Bank staff interested in agricultural yield insurance market development, public officials responsible for financial market policy formulation and supervision, and insurance industry practitioners in Latin America and the Caribbean with a basic primer on the topic, an overview of previous experiences, and a set of guidelines and recommendations on how to develop viable and sustainable agricultural yield insurance markets.

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