Development of climate index insurance model for improving rice farmers resilience to cope with climate change

Abstract

Agriculture, particularly the rice farming system (SUT) is very vulnerable to weather and climate related shocks. Crop failure due to these events will be amplified by climate change. As rice is main staple food in Indonesia, these shocks often lead to food insecurity, debt and the destructive of productive assets which can push farmers into persistent poverty. Therefore, it is to develop protection system for farmers from the impact of climate shocks. One of the potential protection system for farmer is Climate Index Insurance. Climate Index Insurance is a promising tool for facilitating adaptation to climate risk. It can help enhance productivity for farmers in normal years by protecting them from the risks of the worst years. This index is very different from conventional crop insurance. The Climate Index Insurance provides payments to the policy holders when the unexpected climate shocks occurred which is called as Climate Index. Thus when the index is met, the policy holders will get insurance claim without any evidence of crop failure. This study aimed to design climate index insurance model for rice farming system at Cikedung of Indramayu district, a district which is prone to drought risk. The study suggests that the seasonal rainfall can be used as climate index for the rice farming. Rainfall index obtained for rice planted in dry season is 183 mm for phase 1 (0-45 days after planting), 136 mm for phase 2 (46-80 days after planting), 119 mm for phase 3 (81-110 days after planting) or 439 mm for the entire phases. Based on interview with farmers, majority of farmers (82%) are in preference to the climate index insurance. However, they willingness to pay the premium varied. Most farmers are willing to pay premium of not more than 200-300 thousand rupiah per season per hectare. This study suggests that the implementation of climate index insurance policy is very potential for protecting and assisting farmers in managing climate risk.