1. Governance and organizational partnership
It is crucial to establish a partnership between the private and public sector and NGOs in Bangladesh to implement IBI. Public sector would have the responsibility of setting a policy and regulatory framework to ensure that insurance services are reliable and protect those who purchase insurance products. SBC and large private banks can act as reinsurers. Private companies will need reinsurance support prior to introducing crop insurance.
Because of their network and reach in rural communities, NGOs and MRs can best implement grassroots projects.
Since 1952, the Bangladesh Meteorological Department (BMD) has been collecting high-quality data. Each three hour, rainfall is recorded from 35 weather stations across Bangladesh. This data is used primarily to forecast the weather. ADO proposes to upgrade at most 20 weather stations. It is also preparing maintenance plans to improve near-real-time weather data collection, reporting and system. The IFC scoping report, however, is the only one to indicate the need for more detailed infrastructure at weather stations in order to ensure fair settlements with low basis risk.
The Flood Forecasting and Warning Center for Bangladesh Water Development Board has been collecting daily water height data from 342 water level stations over the past 30 year to help assess the timing and duration river flooding during monsoon season. These data can be used to identify days when water levels reached levels higher than the designated danger level for each station.
Since decades, the Bangladesh Bureau of Statistics has been collecting yield data for major crops. Publicly available yield estimates for each district are available. This sampling allows for yield estimates at sub-district and district levels. Each district has its own yield estimates for Boro season. These include the high-yielding, focal, and Pijam paddy.
The type of risk (e.g. drought, excessive rain) will affect the index model. A multidisciplinary approach is required to construct a model. This includes meteorologists and hydrologists as well as insurance specialists. The model will determine the insurance payout level. Excess rain can be defined as more that 80mm of rain in less than a day. While some models pay out the full amount insured or zero, others have different payout levels that are correlated with the severity of risk. CIMMYT and IFPRI are using the full sum or zero model for drought insurance, while CIMMYT considers a triggered pay model. IBI can be used at different levels. Farmers are directly targeted at micro level for insurance. MFIs take out insurance at meso levels to protect their credit risk due to crop loss.
IBI is used to finance extreme weather relief efforts by government agencies and disaster relief organizations at the macro level. All IBI projects currently underway in Bangladesh are at the micro level, except Oxfam’s meso-level flood insurance.
IBI contracts should be fair, transparent, reasonably priced, and easy to understand for farmers. Farmers, local decision-makers, and experts need to be included in the design of the contract. This will ensure that all perspectives are taken into consideration. To limit the time for which the underlying Index is calculated, all contracts have a set start and end date. The IFPRI pilot runs from July through October. This is the time when farmers are most at risk of crop damage.
5. Farmers need to build their capacity and communities.
Through consultation with farmers, it is important to ensure that they have ownership of the Insurance product. Farmers can help to validate and address any issues that may arise in adapting or improving the contract or index.
Sometimes, the weather risk may be just below the threshold point for insurance payout. In these cases, farmers could lose their crops without receiving compensation. Farmers may find it beneficial to create community groups, which can pool their resources, such savings or other forms of financial assistance. Members of the community group can also support one another when they are affected by household-level events that are not covered by insurance.
6. Workshop ALMS
ICCCAD met with select practitioners and experts to discuss the objectives and program for the workshop in preparation. CIMMYT interviewed representatives from the following organisations. Comprehensive Disaster Management Program (CDMP), International Research Institute for Climate and Society (IRI), Columbia University (IFC) and IFPRI.
Most experts and practitioners agreed that there has not been much practical intervention in Bangladesh regarding IBI in Bangladesh in recent years. The workshop should be action-oriented and promote the IBI agenda. The workshop should provide participants with a better understanding of the best practices and actions that can be taken by their organizations to tackle the many challenges associated with IBI implementation in Bangladesh.