Chaco Province, Argentina : feasibility study for the design and implementation of cotton index insurance

This report presents the findings and recommendations of the feasibility study for a macro-level index insurance program for the Provincial Government of Chaco (GoC) as part of its natural-disaster risk management strategies for cotton growers located throughout the 25 departments of the province. Two index options were reviewed under this study starting with a macro-level rainfall deficit and excess rainfall cover based on individual rainfall weather stations in Chaco province, but as the rainfall index prototypes modeled produced very poor correlations with departmental average yields of cotton, this option was deemed inappropriate as a risk transfer instrument for GoC. The second index product analyzed was a macro-level area yield index insurance (AYII) cover which uses, as the basis of insurance and indemnity, the departmental average yield of raw cotton and which was designed to protect the GoC's and or lending institutions' financial exposure to severe climate related cotton production and yield shortfall. This product appears to show potential for implementation for cotton grown in Chaco province, but further technical and operational design work will be required in 2013 before this AYII product can be launched.