ENSO Index-Based Insurance for Agricultural Protection in Southern Peru
The article presents a demonstration of methodology and application for one specific crop in a department of southern Peru. The purpose of this product is to streamline the ability of decision makers to provide financial relief to affected farmers during, and perhaps before, drought; extending the lead-time of the index that is used to trigger product payouts produces results of similar skill to a product trained on concurrent conditions. Issues explored in this work include basis risk, initial endowment requirements, product longevity, and the potential crossover from index-based insurance to forecast-based financing. The ability of such products to mitigate losses during and after drought may be advantageous in Peru and other regions with notable interannual climate variability.