In recent years, perhaps due to the effects of climate change, unusually heavy rains have become more frequent, resulting in a large number of human and economic losses. The total claims paid by the major Japanese non-life insurance companies in 2018 reached a record high due to long rains in what has become known as the linear rainfall belt and typhoons making landfall in wide areas. The coastal areas of developing countries have been hit hard.

Coastal areas in developing countries are constantly exposed to the risk of cyclone landfalls and storm surges, the scale of which is becoming more severe every year with climate change. In particular, floods, droughts, and saltwater intrusion caused by landfalling cyclones can cause medium- to long-term damage to agricultural production. For example, on May 2, 2008, Nargis, a cyclone of unprecedented intensity, made landfall in the Ayeyarwady region along the coast of Myanmar, claiming the lives of more than 100,000 people. The impact of increased soil salinity caused by the cyclone's landfall on plant growth can take several years. Since the disaster by landfall of cyclone Nargis, the challenge for the country's coastal areas has been how to respond to such extreme events.

In response to increase in the frequency of extreme events, there is a growing demand for insurance, not only for life but also for products. Crop insurance, which secures food and stabilizes farmers' incomes, is a prime candidate for climate change adaptation. If a farmer buys a regular crop insurance and the weather conditions are very severe, he may abandon cultivation in order to get the insurance money. In addition, the insurance company will have to pay a lot of money to assess the damage. This moral and cost problem is a hindrance to the spread of crop insurance.

Weather Index Insurance (WII) has been developed to overcome these problems of normal crop insurance and to achieve sustainable management for farmers in developing countries. This insurance is designed to pay farmers insurance money when weather indices, such as rainfall and temperature, are above or below a certain value. Since this insurance depends only on weather indices, it is not affected by the farmers' actions in anticipation of the insurance payment. It also reduces the costs associated with damage assessment. Free from insurance-driven behavior and with low assessment costs, WII is a very important climate change adaptation measure for farmers in developing countries to achieve sustainable management, and it is actually being sold in Thailand and India.

However, this WII is not always a good thing. If the affected area is located far away from the meteorological observation facility, the insurance may not be paid even if the crop is damaged because the weather in the affected area cannot be properly monitored. In this case, the farmer faces a double risk: the risk that his crop will be damaged, and the risk that the insurance will not pay out even if the crop is damaged. In order to reduce the risk of damage but no insurance payment, it is desirable to utilize satellite data, understand the actual insurance needs of farmers, and present an insurance design based on these needs.

A multidisciplinary project team, including JIRCAS and the University of Yezin, developed a WII for rice farmers in the disaster-prone coastal areas of Myanmar by measuring the frequency of cyclone landfall and salt damage, identifying the demand for insurance by disaster, and designing insurance for sustainable agricultural management. The following steps were taken. First, to identify the level of risk in the target area, satellite data and statistical data were used to determine cyclone path changes, disaster frequency, and saltwater intrusion area in the Bay of Bengal. Next, an experimental study was conducted to determine which aspects of disasters farmers value more, and it was found that the demand for insurance against cyclone landfall, floods or droughts that cause them is relatively greater than that for saltwater intrusion. Finally, we constructed an economic model of WII for floods indexed to rainfall and calculated the insurance premiums for the average farmer. The results showed that if the average rice farmer in the target area paid US$41.5 per year, his income would be stable even under harsh conditions.

The results of the analysis is published in a special issue of Paddy and Water Environment, and are expected to contribute significantly to the development of WII for non-life insurance companies operating in the Southeast Asian coastal region.

Reference
Furuya J, Omori K, Aizaki H (2021) Toward the development of a weather index insurance for rice farmers in the coastal region of Myanmar. Paddy and Water Environment https://link.springer.com/article/10.1007/s10333-021-00862-7

Contributor: FURUYA Jun (Director, Social Sciences Division)