2011年-世界发展银行全球_Jamaica___Weather_Insurance_for_the_Coffee_Sector_Feasibility_Study_56页_3mb

Summary of Weather Insurance for the Coffee Sector Feasibility Study in Jamaica

Core Content

This document presents a feasibility study on the implementation of weather-based insurance for the coffee sector in Jamaica, specifically focusing on wind index insurance. The study was conducted by the World Bank in collaboration with the Coffee Industry Board (CIB) and the Ministry of Agriculture & Fisheries (MOA), and is supported by the Global Index Insurance Facility (GIIF) and the All ACP Agricultural Commodities Programme.

The main objective of the study is to assess the feasibility of using parametric insurance models to provide financial protection to coffee farmers in the Blue Mountain region against losses caused by tropical cyclones (hurricanes and tropical storms), which are major contributors to agricultural damage in the area.

Main Points

1. Risk Exposure and Background

• Coffee farmers in Jamaica's Blue Mountain region are particularly vulnerable to high winds and heavy rainfall during the hurricane season (July to November).
• A previous coffee insurance scheme, operated by the Coffee Industry Board (CIB), was discontinued in 2006 due to several issues, including lack of farmer registration, challenges in field loss assessment, and legal uncertainties.
• The scheme was based on a private Deed of Trust and was an aggregate-level insurance policy, which limited its effectiveness.

2. Risk Modeling Approach

• A wind index-based insurance model was developed to simulate wind speeds and correlate them with coffee production loss.
• The model uses historical storm data from the NOAA Caribbean basin database and incorporates topography and phenology (growth stages) to estimate crop vulnerability.
• 16 zones were defined based on districts and altitude bands (Low, Medium, High), to group farmers and determine payout rates.
• The model is not capable of simulating rainfall, which is another significant risk factor for coffee crops, but preparatory work has been done to integrate rainfall data when it becomes available.

3. Model Outputs and Validation

• The model outputs were validated against historical major wind events (from 1980 to 2011), showing a reasonable correlation with actual damages.
• However, basis risk (discrepancy between model payouts and actual losses) remains a concern, especially in rainfall-related events where wind is not the primary cause of damage.
• The Probable Maximum Loss (PML) is estimated at 50.4% of the Total Sum Insured (TSI), based on 250-year simulations.
• The commercial premium rate is estimated at 9.16%, with zone-specific variations ranging from 7.26% to 12.12%.

4. Insurance Product Design

• The proposed insurance product includes:
  • Compulsory Basic Cover: Funded by a uniform cess collected on all delivered cherry coffee.
  • Optional Top-Up Cover: Based on zone-specific risk levels, allowing for differentiated premiums.
• The Basic Cover is designed to be affordable, with the cess covering 56% of the sale value of coffee cherry.
• The Top-Up Cover allows for greater flexibility and risk adjustment across different zones.

5. Implementation Considerations

• Farmer registration is a key component, and will be integrated with the Farmer Registration and Activity Tracking System (FRATS).
• The insurance product is best suited as an individual farmer contract (micro-level index product), rather than an industry-level (meso-level) coverage.
• Reinsurance is essential due to the high catastrophic risk of wind events.
• The government could potentially take on the top layer of reinsurance, covering losses that occur once every 25 years, to reduce premium costs for farmers.

6. Legal and Regulatory Issues

• The CIB must obtain regulatory approval and legal clarity to implement the insurance program.
• The insurance/ reinsurance policy must be structured to ensure clarity in claims and proper registration procedures.
• A pilot program is recommended to test the model and build capacity, with budgeting and contracting with the modeling firm being necessary.

7. Challenges and Limitations

• Basis Risk is a major challenge, due to:
  • Localized differences in damage.
  • Complex topography in the Blue Mountain region.
  • Phenological variability affecting vulnerability.
  • Lack of rainfall modeling in the current study.
• The insurance scheme is described as an "income supplement" rather than a "proxy for crop insurance" due to these limitations.

8. Future Steps

• The study recommends further rainfall modeling as part of future work.
• Pilot implementation is proposed, along with capacity building and regulatory discussions.
• The CIB and MOA are encouraged to consult with farmers and processors to develop an implementation plan.

Key Information

• Feasibility Study: Conducted by the World Bank, CIB, and MOA.
• Funding: Provided by GIIF and All ACP Agricultural Commodities Programme.
• Modeling Firm: CGM Gallagher Group Ltd.
• Target Area: Blue Mountain region of Jamaica.
• Insurance Type: Wind index-based insurance.
• Payout Mechanism: Based on simulated wind speeds and vulnerability curves.
• Risk Zones: Defined based on districts and altitude bands.
• PML: 50.4% of TSI.
• Commercial Premium Rate: 9.16%, with zone-specific variations.
• Cess Collection: Used to fund the Basic Cover.
• Basis Risk: High due to local variability, topography, and lack of rainfall data.

Conclusion

The study concludes that wind index-based insurance is a feasible and innovative approach to managing weather-related risks in the Jamaican coffee sector. It provides objective payouts, reduces moral hazard, and allows for efficient risk transfer to the international reinsurance market. However, basis risk remains a significant concern, and the product is best described as an "income supplement" rather than a "proxy for crop insurance". A pilot program is recommended to test the model, build capacity, and ensure legal and regulatory compliance before full implementation.