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 South West Buenos Aires Province is very exposed to droughts which impact severely on pasture production.

In 2011, the Government of Argentina through the Ministry of Agriculture, Livestock and Fisheries (MAGyP), requested the World Bank to 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.