The idea of using mortality index insurance to insure against livestock losses from natural disasters was proposed by GlobalAgRisk in 2001, as part of a World Bank project. At that time Mongolia had recently experienced massive livestock losses resulting from severe winter conditions that left many herders in a desperate situation. GlobalAgRisk designed the Index-based Livestock Insurance Pilot that began in 2005 and continues as the lead consulting firm to the Government of Mongolia for the implementation of the pilot program. Indemnities are paid based on livestock mortality rates at the county level. The pilot structures a public-private partnership where insurers sell a commercial product to protect herders from moderate to large livestock losses and the government provides financing for extreme losses. In the second pilot year, 13 percent of the eligible herders purchased this insurance. This project received the 2006 World Bank Golden Plough Award for Innovation.

Since 2003, GlobalAgRisk has been advising both public and private sector insurance companies in developing new weather index insurance products in India, which has become the largest market in the world for weather index insurance. GlobalAgRisk was an early advisor to the World Bank team that was integral in creating the first weather index insurance product in India. GlobalAgRisk has also advised the government agricultural insurer, the world’s largest provider of weather index insurance.

As part of a project with the InterAmerican Development Bank, GlobalAgRisk designed a prototype index product that would pay water user associations when inflows of water to the Rio Mayo Reservoir fall below normal. The irrigation insurance product would be likely to facilitate water markets. This new approach of blending financial risk transfer solutions with capital investments could add considerable efficiency to irrigation projects around the globe.

Under a USAID funded project, GlobalAgRisk led a team that designed an insurance product to strengthen rural finance in Peru. Our team identified flooding from El Niño as a leading constraint to agricultural lending in the northern regions of Peru. In collaboration with researchers at Columbia University, our research clearly demonstrated that significant increases in sea surface temperatures was highly correlated to extreme flooding in this area. GlobalAgRisk designed a prototype index insurance product based on oscillations in the sea surface temperature that could be used to transfer the portfolio risks of rural lenders and, ultimately, to transfer benefits to small households. GlobalAgRisk obtained the approval of this product by the Peruvian regulator and is involved in ongoing discussions with the private sector in developing similar products for the rural insurance market.

A new program to support the development and pilot testing of effective and affordable index-based weather insurance products for markets that serve small farmers has been launched by GlobalAgRisk working with an arrangement with the University of Kentucky that supports a rigorous academic research agenda, which also includes scholars from Columbia University, Mississippi State University, and the Ohio State University. Complementing these efforts, internationally known specialists and a legal and regulatory advisor on index insurance will contribute to an ambitious research and outreach program.

A grant to GlobalAgRisk from the Bill and Melinda Gates Foundation supports this program as part of the Foundation’s efforts to create financial markets to serve the poor. Progress in transferring natural disaster risks to global markets could have a major impact on economic development and poverty reduction in lower income countries. .

GlobalAgRisk is the lead consulting firm for an Asian Development Bank project to develop index insurance for flood losses in the Mekong Delta. The prototype products are designed to pay when early flooding impedes the second-season rice harvest. In the first phase, the products will be used by rural lenders and in the second phase, will be linked to lending to directly benefit borrowers.

In 2004, GlobalAgRisk examined the potential for developing rainfall index insurance to hedge against drought and famine risk as part of a World Bank project. The analysis and conceptual recommendations from this study have motivated new efforts by the World Bank and the World Food Programme to introduce index insurance pilots for drought risk and food insecurity. The World Food Programme is now implementing this idea to provide financial assistance for drought-induced famine in Ethiopia.

Jerry Skees was a presenter at an international conference on agricultural insurance in Central America held in Antigua, Guatemala in May, 2005. The conference brought together representatives from both the public and private sectors to discuss innovations and challenges to agricultural insurance.

As part of a World Bank project in 2000, Jerry Skees conducted a feasibility study on rainfall index insurance to hedge drought risk for cereal producers in Morocco .

In 1998, Jerry Skees was part of a World Bank team investigating opportunities for index insurance for agriculture in Nicaragua. Peter Hazell and Jerry Skees provided the first feasibility study in the spring of 1998. Subsequently, Skees and Mario Miranda examined the issue in more detail and made specific recommendations about rainfall insurance in the major cereal production area of northwest Nicaragua, where the leading risk to cereal production is insufficient or excess rainfall. Skees and Miranda suggested that rainfall index insurance contracts could be introduced and sold to individual farmers to hedge against the risk of both drought and excess rain. At that time the government of Nicaragua did not pursue pilot development. Recently however, renewed interest from the government has led the World Bank to examine new opportunities for the development of index insurance for certain crops.

GlobalAgRisk performed a feasibility study on opportunities for using area-yield and rainfall index insurance for financing catastrophic yield risk for Romanian farmers as part of a USAID project in 2001–2002.

In 2002, GlobalAgRisk was contracted by the World Bank to research the potential for agricultural insurance in Turkey. The objective of this project was to meet with stakeholders in government and the agricultural and private sectors to identify risk management needs and constraints to providing an agricultural insurance program, and to consider the feasibility of index insurance against weather risks for Turkish farmers. The findings and recommendations from this analysis were presented at a stakeholder conference and helped to shape the scope of work for several follow-up projects.

Under a 2002 World Bank project, GlobalAgRisk conducted a feasibility analysis of crop risks in Ukraine.

U.S. Government

Federal Crop Insurance Program (FCIP)—GlobalAgRisk has been involved in multiple projects and reviews as requested by the Risk Management Agency of the U.S. Department of Agriculture examining issues related to the performance of the FCIP. Skees and others designed an area-yield index insurance product, the Group Risk Plan (GRP), now offered by the Federal Crop Insurance Corporation.

Private Sector Projects

• Conceptual design of an index insurance project to hedge against the environmental risk associated with manure storage systems
• Review and analysis of proposed crop insurance products
• Feasibility analyses on the use of weather markets for agricultural insurance in the United States