The potential for scale and sustainability in weather index insurance for agriculture and rural livelihoods

Risk is inherent in agriculture. Farmers face a variety of market and production risks that make their incomes unstable and unpredictable from year to year. Input prices may increase out of reach, crops may be destroyed by drought or pest outbreaks, selling prices may plummet and harvests may rot in poor storage facilities.

In many cases, farmers also confront the risk of natural catastrophe. Assets and lives may be lost due to severe droughts, hurricanes, earthquakes and floods. The type and severity of the risks confronting farmers are particularly burdensome to small-scale farmers in the developing world.

Unless adequately managed, agricultural risks slow economic development, hamper poverty reduction and contribute to humanitarian crises.