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Feasibility Study for Cotton and Livestock Index Insurance - Argentina

Argentina’s agriculture sector is very vulnerable to weather risks. For instance, cotton in the Chaco Province - the most important cotton producing area in Argentina and the third poorest province - is very exposed to drought, excess rainfall and pests. Similarly, cattle-rearing in southwest Buenos Aires Province is very exposed to droughts which impact severely on pasture production.
Project type:

 Index-based insurance feasibility studies

Requesting Agency:

Ministry of Agriculture, Livestock, and Fisheries (ORA-MAGyP)

Project rationale:
  • In 2011, the Government of Argentina through the Ministry of Agriculture, Livestock and Fisheries (MAGyP), requested the World Bank conduct a feasibility study for the development of a suitable index-based agricultural insurance product to protect cotton producers located in Chaco Province against weather variability and other hazards causing losses in their cotton crop.
  • It also requested the World Bank to conduct a feasibility study for the development of a suitable NDVI index-based insurance for Livestock Producers in southwest Buenos Aires
Key achievements:
  • Two feasibility study reports for livestock and cotton index-based insurance were completed in 2012.
  • The WB GIIF Team developed two easy to use Excel based software solutions a high resolution database that allows users to easily calculate pure loss cost rates, technical rates and indicative commercial premium rates for each Insured Unit, along with the corresponding user manual. This allows all stakeholders to base their discussions on actuarial facts known to all.
  • Both studies concluded that retail insurance (e.g. individual farmer) is not advisable because of substantial basis risk and the time-consuming and resource-consuming need to set up appropriate distribution structures that reach individuals. Instead, macro-level insurance with government subsidies and support is recommended, along with the strengthening of the existing public protection mechanisms, because costs will be more predictable and their impact will be more effective.
Key stakeholders:

The Agricultural Risk Office within the Ministry of Agriculture, Livestock, and Fisheries, of Argentina, the Ministry of Agriculture Production and Environment of the Chaco Province , the Economic and Social Council of the Province of Chaco,; the Ministry of Agrarian Affairs of the Province of Buenos Aires; the Council for the Development of the South West of Buenos Aires; the Insurance Supervisor; the Remote Sensing and Regional Analysis Laboratory University of Buenos Aires; the National Institute of Farming and Livestock Technology, and the insurance industry.

Contacts:

Fatou Assah
Program Manager
World Bank group
Tel: + 1 202 473 6160
Fassah@worldbank.org