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Improving index-based drought insurance in varying topography: evaluating basis risk based on perceptions of Nicaraguan hillside farmers

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Title Improving index-based drought insurance in varying topography: evaluating basis risk based on perceptions of Nicaraguan hillside farmers
 
Creator Kost, André
Läderach, Peter
Myles, Fisher
Cook, Simon E.
Gómez, Lorena
 
Subject agriculture
climate
drought
insurance
smallholders
 
Description This paper discusses a methodology to model precipitation indices and premium prices for index-based drought insurance for smallholders. Spatial basis risk, which is borne by the insured, is a problem, especially in variable topography. Also, site-specific drought risk needs to be estimated accurately in order to offer effective insurance cover and ensure financial sustainability of the insurance scheme. We explore farmers' perceptions on drought and spatial climate variability and draw conclusions concerning basis risk with regards to the proposed methodology. There are technically many options to represent natural heterogeneity in index insurance contracts while serving the customer adequately and keeping transaction costs low.
 
Date 2012-12-11
2014-08-15T12:13:14Z
2014-08-15T12:13:14Z
 
Type Journal Article
 
Identifier Kost A, Läderach P, Myles F, Cook SE, Gómez L. 2012. Improving index-based drought insurance in varying topography: evaluating basis risk based on perceptions of Nicaraguan hillside farmers. PLOS ONE 7(12):e51412.
https://hdl.handle.net/10568/41975
https://doi.org/10.1371/journal.pone.0051412
 
Language en
 
Rights CC-BY-4.0
Open Access
 
Source PLOS ONE