Innovations in agricultural insurance: Lessons learnt about managing smallholder farmer risks

Market and weather-related risks pose significant challenges to smallholder producers. These risks can make production and incomes volatile from year to year, reduce food security, threaten assets and financial security, and make farmers hesitant to invest in new technologies or practices to increase long-term productivity and welfare.

Agricultural insurance has the potential to help farmers manage these risks. However, insurance markets in many developing countries are either weak or inaccessible to most smallholders. Innovative forms of agricultural insurance, such as index-based insurance (IBI), have gained attention in recent years as a way of overcoming many of the limitations of traditional forms of agricultural insurance, but questions remain regarding these tools’ effectiveness and scalability.