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Seasonal index-based corn insurance design for Brazil: Insights from Safra and Safrinha

Author

Listed:
  • Mazviona, Batsirai
  • Sølvsten, Simon
  • Marques, Reinaldo
  • Piazzarolo, Carolina Cabo

Abstract

Index insurance is promoted for climate risk management, but basis risk limits scalability. This article develops an ex ante, multi-hazard weather-yield index framework for corn in Paraná, Brazil, tailored to the state’s dual-season system (Safra and Safrinha) and the distinct priorities of farmers and insurers. We combine municipality-level yield panels with climate extreme indicators spanning temperature, precipitation, humidity, radiation, wind, and evaporative demand, and evaluate mean- and tail-focused econometric specifications alongside penalised alternatives to guard against overfitting. Basis risk is treated as two-sided and designable by explicitly trading off false negatives (uncompensated losses) and false positives (unnecessary payouts) through a stakeholder-weighted objective, implemented within clustered municipal zones and season-specific windows. Our framework delivers a transparent mapping from alternative basis risk priorities to contract design choices, offering a practical blueprint for piloting credible index insurance where products are not yet established.

Suggested Citation

  • Mazviona, Batsirai & Sølvsten, Simon & Marques, Reinaldo & Piazzarolo, Carolina Cabo, 2027. "Seasonal index-based corn insurance design for Brazil: Insights from Safra and Safrinha," Land Use Policy, Elsevier, vol. 172(C).
    • Handle: RePEc:eee:lauspo:v:172:y:2027:i:c:s0264837726004436
    DOI: 10.1016/j.landusepol.2026.108359
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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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