Weather index insurance for agriculture and rural areas in lower-income countries

Weather index insurance for agriculture and rural areas in lower-income countries have particular advantages. This include simplification of the sales process since the insurance contract is relatively straight-forward, there is no need to estimate the actual loss experienced by polyholder since indemnities are paid based exclusively on the realized value of the underlying index. In addition, there is no need to classify individual policyholders according to their risk exposure unlike traditional insurance products. Weather index insurance provide risk management opportunities for the rural poor and is based not on actual losses experienced by poplicyholder but on realizations of a weather index. By means of assisting with demand assessment, establishing an appropriate legal and regulatory framework, collecting and managing the required data, training insurance suppliers and providing objective information to potential users of weather index insurance, governments, donors and international financial institutions can facilitate the offering of weather index insurance.