Index-based contracts are crucial innovations on the micro-insurance market. By making the contract contingent on the value taken by an objective and exogenous index, parties should manage to minimize transaction costs, in particular those due to imperfect and asymmetric information. In turn this innovation should allow poor people traditionally excluded from this market to have access to some insurance, most notably agricultural smallholders. In the last decade, many pilot programs have been set up throughout the developing world to evaluate index-based insurance products. So far, the

Index insurance is a relatively new but innovative approach to insurance provision that pays out benefits on the basis of a pre determined index (e.g. rainfall level) for loss of assets and investments, primarily working capital, resulting from weather and catastrophic events, without requiring the traditional services of insurance claims assessors. It also allows for the claims settlement processes to be quicker and more objective. Before the start of the insurance period, a statistical index is developed measuring deviations from the normal level of parameters such as rainfall, temperature

Under Mexico’s G20 Presidency, Vice Ministers/Deputies of Agriculture from the countries of the G20, and invited countries1 (the “G20 Agriculture Group”) met in Mexico City with the aim of articulating goals, focusing efforts and establishing sound commitments to address food security challenges under a global perspective.

Long-term crop insurance is operated across more than 200 million hectares of agricultural land around the world. For more than 35 years, valuable experience has been gathered on this crop insurance system. Munich Re has filtered out the characteristics of the system which are responsible for its longterm success and defined them as a 'best practice' for crop insurance: SystemAgro: The framework is provided by a public private partnership designed on insurance principles. All insurance-related conditions which are important for securing the growing of agricultural crops are governed by laws and regulations. These are, for example: access to insurance, covering the insurance requirement at reasonable premiums or transparency of insurance conditions and claims handling.

Agriculture remains a source of livelihood for almost half of humanity. It is also a source of growth for national economies and can be a provider of investment opportunities for the private sector. However, millions of poor people face prospects of tragic crop failure or livestock mortality when, as a result of climate change, rainfall patterns shift or extreme events such as drought and floods become more frequent. Agricultural insurance is key in assisting farmers, herders, and governments lessen the negative financial impact of these adverse natural events.