Review article: Design and evaluation of weather index insurance for multi-hazard resilience and food insecurity

Abstract

Ensuring food security against climate risks has been a growing challenge recently. Weather index insurance has been pointed out as a tool for increasing the financial resilience of food production. However, the multi-hazard insurance design needs to be better understood. This paper aims to review weather index insurance design for food security resilience, including the methodology for calculating natural hazards' indices, vulnerability assessment, and risk pricing. We searched for relevant research papers in the Scopus database using the Preferred Reporting Items for Systematic reviews and Meta-Analyses (PRISMA) protocol. Initially, 364 peer-reviewed papers from 1 January 2010 to 19 February 2022 were screened for bibliometric analysis. Then, the 26 most relevant papers from the last 5 years were systematically analyzed. Our results demonstrate that despite a significant research effort on index insurance, most papers focused on food production. However, research considering other aspects of food security, such as transportation, storage, and distribution, is lacking. Most research focuses on droughts. Other hazards, such as extreme temperature variation, excessive rainfall, and wildfires, were poorly covered. Most studies considered only single-hazard risk, and the multi-hazard risk studies assumed independence between hazards, neglecting the synergy hypothesis between hazards. Lastly, we proposed a conceptual framework that illustrates design paths for a generalized weather index insurance design and evaluation. Solutions for addressing multi-hazard problems are considered. An illustrative example demonstrates the importance of testing the multi-hazard risk hypothesis for weather-based index insurance design for soybean production in Brazil.