IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v16y2024i9p3571-d1381985.html
   My bibliography  Save this article

Index Insurance for Forage, Pasture, and Rangeland: A Review of Developed (USA and Canada) and Developing (Kenya and Ethiopia) Countries

Author

Listed:
  • Simon Maina

    (Department of Economics, Applied Statistics & International Business, Las Cruces, NM 88003, USA
    Department of Agricultural Economics and Agricultural Business, New Mexico State University, Las Cruces, NM 88003, USA)

  • Maryfrances Miller

    (Department of Agricultural Economics and Agricultural Business, New Mexico State University, Las Cruces, NM 88003, USA)

  • Gregory L. Torell

    (Department of Agricultural Economics and Agricultural Business, New Mexico State University, Las Cruces, NM 88003, USA)

  • Niall Hanan

    (Plant and Environmental Sciences, New Mexico State University, Las Cruces, NM 88003, USA)

  • Julius Anchang

    (Plant and Environmental Sciences, New Mexico State University, Las Cruces, NM 88003, USA)

  • Njoki Kahiu

    (Plant and Environmental Sciences, New Mexico State University, Las Cruces, NM 88003, USA)

Abstract

Index insurance for forage, pasture, and rangeland has gained ground in policy and academic circles. Stakeholders promote it as an innovative risk management tool for enhancing resilience to drought-induced perils and providing a way for consumption smoothing to livestock producers in drought vulnerable ecosystems. Index insurance, which avoids market failures such as moral hazard, adverse selection, and transactional cost, has been piloted and implemented all over the world. To support future development and research on index-based insurance in livestock systems, operational index insurance for forage, pasture, and rangeland systems in developed (USA and Canada) and developing (Kenya and Ethiopia) countries are reviewed and compared. This paper finds some similar characteristics (huge subsidy payments—ranging from 50 to 100 percent, significant government role, low adoption, insufficient payouts, data challenges, etc.), of this product between the two regions. A major difference between the PRF and NDVI is the number of choices available to users of rainfall index insurance who face close to 3000 choice options, while NDVI users have less than 5 choice options available for them. Based on these insights, we highlight opportunities where the two regions can benchmark and improve upon their respective index insurance schemes—index-based livestock insurance (IBLI) in developing and rainfall index insurance for forage in developed regions.

Suggested Citation

  • Simon Maina & Maryfrances Miller & Gregory L. Torell & Niall Hanan & Julius Anchang & Njoki Kahiu, 2024. "Index Insurance for Forage, Pasture, and Rangeland: A Review of Developed (USA and Canada) and Developing (Kenya and Ethiopia) Countries," Sustainability, MDPI, vol. 16(9), pages 1-23, April.
    • Handle: RePEc:gam:jsusta:v:16:y:2024:i:9:p:3571-:d:1381985
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/16/9/3571/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/16/9/3571/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Michael R. CARTER & Alain de JANVRY & Elisabeth SADOULET & Alexandros SARRIS, 2014. "Index-based weather insurance for developing countries: A review of evidence and a set of propositions for up-scaling," Working Papers P111, FERDI.
    2. Brittney Goodrich & Jisang Yu & Monte Vandeveer, 2020. "Participation patterns of the rainfall index insurance for pasture, rangeland and forage programme," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 45(1), pages 29-51, January.
    3. Milton Boyd & Brock Porth & Lysa Porth & Ken Seng Tan & Shuo Wang & Wenjun Zhu, 2020. "The Design of Weather Index Insurance Using Principal Component Regression and Partial Least Squares Regression: The Case of Forage Crops," North American Actuarial Journal, Taylor & Francis Journals, vol. 24(3), pages 355-369, July.
    4. Nathaniel Jensen & Christopher Barrett, 2017. "Agricultural Index Insurance for Development," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 39(2), pages 199-219.
    5. Van Orden, Chad & Willis, Brandon & Bosworth, Ryan & Larsen, Ryan & McCarty, Tanner & Man-Keun, Kim, . "Weather Station Locations are Significant for Drought Insurance," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 35(01).
    6. James B. Keller & Tina L. Saitone, 2022. "Basis risk in the pasture, rangeland, and forage insurance program: Evidence from California," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(4), pages 1203-1223, August.
    7. Hans P. Binswanger-Mkhize, 2012. "Is There Too Much Hype about Index-based Agricultural Insurance?," Journal of Development Studies, Taylor & Francis Journals, vol. 48(2), pages 187-200, February.
    8. Jensen, Nathaniel D. & Mude, Andrew G. & Barrett, Christopher B., 2018. "How basis risk and spatiotemporal adverse selection influence demand for index insurance: Evidence from northern Kenya," Food Policy, Elsevier, vol. 74(C), pages 172-198.
    9. Vandeveer, Monte & Berger, Aaron & Stockton, Matthew, "undated". "Pasture, Rangeland and Forage Insurance for Nebraskans’: An Insurance Pilot Program to Protect Livestock and Hay Producers," Cornhusker Economics 306820, University of Nebraska-Lincoln, Department of Agricultural Economics.
    10. Havstad, Kris M. & Peters, Debra P.C. & Skaggs, Rhonda & Brown, Joel & Bestelmeyer, Brandon & Fredrickson, Ed & Herrick, Jeffrey & Wright, Jack, 2007. "Ecological services to and from rangelands of the United States," Ecological Economics, Elsevier, vol. 64(2), pages 261-268, December.
    11. Richard E. Just & Linda Calvin & John Quiggin, 1999. "Adverse Selection in Crop Insurance: Actuarial and Asymmetric Information Incentives," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(4), pages 834-849.
    12. Parsons, Jay, "undated". "Annual Forage Production Insurance," Cornhusker Economics 306970, University of Nebraska-Lincoln, Department of Agricultural Economics.
    13. Mario J. Miranda & Katie Farrin, 2012. "Index Insurance for Developing Countries," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 34(3), pages 391-427.
    14. Jerry R. Skees, 2008. "Challenges for use of index‐based weather insurance in lower income countries," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 68(1), pages 197-217, May.
    15. John P Dougherty & Richard A Gallenstein & Khushbu Mishra, 2021. "Impact of Index Insurance on Moral Hazard in the Agricultural Credit Market: Theory and Evidence from Ghana," Journal of African Economies, Centre for the Study of African Economies, vol. 30(5), pages 418-446.
    16. Leigh Johnson & Tahira Shariff Mohamed & Ian Scoones & Masresha Taye, 2023. "Uncertainty in the drylands: Rethinking in/formal insurance from pastoral East Africa," Environment and Planning A, , vol. 55(8), pages 1928-1950, November.
    17. Askar Choudhury & James Jones & Adolph Okine & Raquiba (Lena) Choudhury, 2016. "Drought†Triggered Index Insurance Using Cluster Analysis of Rainfall Affected by Climate Change," Journal of Insurance Issues, Western Risk and Insurance Association, vol. 39(2), pages 169-186.
    18. Barnett, Barry J., 2004. "Agricultural Index Insurance Products: Strengths And Limitations," Agricultural Outlook Forum 2004 32971, United States Department of Agriculture, Agricultural Outlook Forum.
    19. Bungchay Lay & Isriya Bunyasiri & Ravissa Suchato, 2023. "Farmers’ Willingness to Purchase Weather Index Crop Insurance: Evidence from Battambang, Cambodia," JRFM, MDPI, vol. 16(12), pages 1-9, November.
    20. Barry K. Goodwin, 2015. "Challenges in the design of crop revenue insurance," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 75(1), pages 19-30, May.
    21. Sommarat Chantarat & Andrew G. Mude & Christopher B. Barrett & Michael R. Carter, 2013. "Designing Index-Based Livestock Insurance for Managing Asset Risk in Northern Kenya," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 80(1), pages 205-237, March.
    22. Leister, Amanda M. & Lee, John G. & Paarlberg, Philip L., 2013. "Dynamic Effects of Drought on the U.S. Livestock Sector," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149946, Agricultural and Applied Economics Association.
    23. Selasco, Eric J. & Hungerford, Ashley E., 2018. "Examining the Design and Use of the Pasture, Rangeland, Forage (PRF) Program," Western Economics Forum, Western Agricultural Economics Association, vol. 16(2), December.
    24. Haimanti Bhattacharya & Dan Osgood, 2008. "Index Insurance and Common Property Pastures," Working Paper Series, Department of Economics, University of Utah 2008_21, University of Utah, Department of Economics.
    25. Vedenov, Dmitry V. & Miranda, Mario J., 2001. "Rainfall Insurance For Midwest Crop Production," 2001 Annual meeting, August 5-8, Chicago, IL 20458, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    26. Collins, Wilson, 2022. "Potential changes to improve the pasture, rangeland, and forage insurance program," 2024 Annual Meeting, July 28-30, New Orleans, LA 322574, Agricultural and Applied Economics Association.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lichtenberg, Erik & Iglesias, Eva, 2022. "Index insurance and basis risk: A reconsideration," Journal of Development Economics, Elsevier, vol. 158(C).
    2. Quentin Stoeffler & Michael Carter & Catherine Guirkinger & Wouter Gelade, 2022. "The Spillover Impact of Index Insurance on Agricultural Investment by Cotton Farmers in Burkina Faso," The World Bank Economic Review, World Bank, vol. 36(1), pages 114-140.
    3. Stoeffler, Quentin & Opuz, Gülce, 2022. "Price, information and product quality: Explaining index insurance demand in Burkina Faso," Food Policy, Elsevier, vol. 108(C).
    4. Nshakira-Rukundo, Emmanuel & Kamau, Juliet Wanjiku & Baumüller, Heike, 2021. "Determinants of uptake and strategies to improve agricultural insurance in Africa: a review," Environment and Development Economics, Cambridge University Press, vol. 26(5-6), pages 605-631, October.
    5. Takahashi, Kazushi & Ikegami, Munenobu & Sheahan, Megan & Barrett, Christopher B., 2014. "Quasi-experimental evidence on the drivers of index-based livestock insurance demand in Southern Ethiopia," IDE Discussion Papers 480, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    6. Aditya Kusuma & Bethanna Jackson & Ilan Noy, 2018. "A viable and cost-effective weather index insurance for rice in Indonesia," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 43(2), pages 186-218, September.
    7. Sarah Janzen & Nicholas Magnan & Conner Mullally & Soye Shin & I. Bailey Palmer & Judith Oduol & Karl Hughes, 2021. "Can Experiential Games and Improved Risk Coverage Raise Demand for Index Insurance? Evidence from Kenya," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(1), pages 338-361, January.
    8. Sommarat Chantarat, 2015. "Index-based Risk Financing and Development of Natural Disaster Insurance Programs in Developing Countries," PIER Discussion Papers 10, Puey Ungphakorn Institute for Economic Research.
    9. Stigler, Matthieu M. & Lobell, David, 2020. "Suitability of index insurance: new insights from satellite data," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304663, Agricultural and Applied Economics Association.
    10. Anuj Singh & Michael King, 2018. "Understanding farmers’ valuation of agricultural insurance: Evidence from Vietnam," WIDER Working Paper Series 93, World Institute for Development Economic Research (UNU-WIDER).
    11. Ana Maria Loboguerrero & Bruce M. Campbell & Peter J. M. Cooper & James W. Hansen & Todd Rosenstock & Eva Wollenberg, 2019. "Food and Earth Systems: Priorities for Climate Change Adaptation and Mitigation for Agriculture and Food Systems," Sustainability, MDPI, vol. 11(5), pages 1-26, March.
    12. King, Michael & Singh, Anuj Pratap, 2020. "Understanding farmers’ valuation of agricultural insurance: Evidence from Vietnam," Food Policy, Elsevier, vol. 94(C).
    13. Matthieu Stigler & David Lobell, 2020. "On the benefits of index insurance in US agriculture: a large-scale analysis using satellite data," Papers 2011.12544, arXiv.org, revised Nov 2021.
    14. Nathaniel Jensen & Munenobu Ikegami & Andrew Mude, 2017. "Integrating Social Protection Strategies for Improved Impact: A Comparative Evaluation of Cash Transfers and Index Insurance in Kenya," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 42(4), pages 675-707, October.
    15. Michael King & Anuj Pratab Singh, 2018. "Understanding farmers' valuation of agricultural insurance: Evidence from Vietnam," WIDER Working Paper Series wp-2018-93, World Institute for Development Economic Research (UNU-WIDER).
    16. Jensen, Nathaniel D. & Mude, Andrew G. & Barrett, Christopher B., 2018. "How basis risk and spatiotemporal adverse selection influence demand for index insurance: Evidence from northern Kenya," Food Policy, Elsevier, vol. 74(C), pages 172-198.
    17. Nathaniel Jensen & Christopher Barrett, 2017. "Agricultural Index Insurance for Development," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 39(2), pages 199-219.
    18. Sommarat Chantarat, 2015. "Index-based Risk Financing and Development of Natural Disaster Insurance Programs in Developing Countries," PIER Discussion Papers 10., Puey Ungphakorn Institute for Economic Research, revised Nov 2015.
    19. Leigh Johnson, 2013. "Index Insurance and the Articulation of Risk-Bearing Subjects," Environment and Planning A, , vol. 45(11), pages 2663-2681, November.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:16:y:2024:i:9:p:3571-:d:1381985. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.