Developing Parametric Insurance for Weather Related Risks for Indonesia

Publication language
English
Pages
51pp
Date published
01 Jan 2018
Type
Research, reports and studies
Keywords
Disaster preparedness, resilience and risk reduction, Drought, Agriculture
Countries
Indonesia
Organisations
World Bank

This study investigates the development of a parametric insurance product as an ex ante risk management instrument that relies on regional drought indices and provides province-level payouts to the Government of Indonesia (GoI) in case of severe droughts. As a case study, the province of Central Java has been chosen given its importance in rice production and a recent request of the Central Java Government to transfer drought risk. This study uses over 50 years of historical gridded precipitation and temperature data to develop standard precipitation indices (SPI) and standard precipitation evapotranspiration indices (SPEI) to quantify drought extents at a resolution of 50 x 50 km. Preliminary results of this study have been shown and discussed with the Ministry of Agriculture of Central Java, the National Weather Service of Indonesia (BMKG), the Office of the Insurance Regulator, the Ministry of Finance, and leading Indonesian insurers in the form of workshops undertaken in Indonesia (Semarang and Jakarta) in July 2017. The availability of longer seasonal rice production data will improve the validation of the developed indices.