Climate Change impact and role of agricultural insurance in Central Asia

Dr. Ihtiyor Bobojonov

Ashgabat Workshop

23-24 November 2017

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Content

• Farm impact in Central Asia

• Role of spatial locations in the irrigation systems

• Adaption option: Crop diversification

• Adaptation option: Insurance project

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• Importance of agricultural production

• Environmental and institutional challenges

• Changing temperature and rainfall patterns

• Uncertainty of crop yields

• Price fluctuations

• Limited research on adaptation options

• Need for further research on climate change impact

Problem Statement Im

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• Expected Value Variance in GAMS

• Yield and management data from crop models

• AEZ data from GIS

Empirical Model Im

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Location of Crop Experiment Stations in Different AEZs

Counry AEZ

Kazakhstan

1 arid

2 semiarid

3 subhumid

Kyrgyzstan

4 subhumid

5 semiarid

Tajikistan

6 arid

7 semiarid

8 humid

Uzbekistan

9 arid

10 semiarid

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Input Price Differences Between the Countries

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Change of Expected Farm Income Im

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Location Dependent Impact Im

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Income Change under B2 and A2 Scenarios in 2050

Spatial change under A2 Spatial change under in B2 Imp

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Crop Diversity in Central Asia Im

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The Role of Alternative Crops under Drought Risk

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KlimALEZ: Increasing climate resilience via agricultural insurance

Insurance project

Prof. Thomas Glauben, Dr. Ihtiyor Bobojonov, Dr. Lena Kuhn

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The role of agricultural insurance

• Provides payments when losses occur

• Enable access to credits

• Increase investment confidence

• Improve productivity

• Increase risk coping potential

• Improves food security for rural and urban population

©weADAPT

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Agricultural insurance market development in the CIS

• Mandatory insurance by “Gosstrakh” during the Former Soviet Union (FSU)

• Collapse of the state insurance mechanisms after independence

• Emergence of semi-state insurance companies in several countries: Kazakhstan, Russia, Ukraine and Uzbekistan

• Lack of agricultural insurance markets in the remaining states

• High interest of international organizations and governments to establish insurance markets in some regions (e.g. Azerbaijan, Armenia and Tajikistan).

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Agricultural insurance in Kazakhstan

• Mandatory insurance for grain crops

• Loss subsidy of 50% from the state

• Very low rate of premiums and low indemnity payment

• Lack of interests of producers

• Current debate: Increasing the price and introducing index insurance

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Agricultural insurance in Uzbekistan

• 25% subsidy until 2002

• Abolishment of the subsidy since 2003

• Multiple peril crop insurance

• Lack of products to cover systemic droughts

• Discussions on re-introduction of subsidies

• High interests of national companies to introduce index insurance to access international reinsurance

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KlimALEZ project objective

Introduction of an agricultural index-based insurance program in Central Asia

Agricultural insurance

Improved credit accesss

Agr. Investment

Decreased production risk

Climate resilience Rural welfare Food security

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NDVI vs. agricultural losses (R2=0.61)

Losses NDVI

• Traditional insurance premiums: 38 USD/ha (16% of revenue)

• Rainfall insurance premiums: 23 USD/ha (9.5 % of revenue)

• NDVI insurance premiums: 29 USD/ha (12,3 % of yield)

Illustrative example for NDVI based index estimations

Suitability of index insurance (example Shortandy)

3) Weather index based on normalized difference vegetation index (NDVI)

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Methods

STEP 1: Scientific development of a region-specific weather index • Analyis of existing insurance pilots • Secondary weather and satellite data • Farm surveys • Expert interviews • Insurance game for demand analysis and price setting STEP 2: Insurance pilot involving local and German insurance companies • Two waves in sample regions in Kazhakstan, Kyrgystan and Uzbekistan • Test consumer demand and product implementation • Adapt product in second wave if necessary

STEP 3: Impact assessment via randomized controlled trial (RCT) • Treatment sample: 400 farms in Kyrgyzstan and Uzbekistan • Test impact on investment and production and spillover effects

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Project team and partners

IAMO team

Prof. Dr. Thomas Glauben

Dr. Ihtiyor Bobojonov

Dr. Lena Kuhn

Research partners

Humboldt-Universität zu Berlin (Germany)

Dr. Roman Mogilevskiy, University of Central Asia (Kyrgyzstan)

Kazagrotechnical University (Kazakhstan)

Talap Analytical Center (Kazakhstan)

Banking and Finance Academy (Uzbekistan)

Insurance and reinsurance companies

SFK Insurance (Kazakhstan)

Jubilee Insurance (Kyrgyzstan)

Gross Insurance (Uzbekistan)

Hannover Re (Germany)

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Thank you for your attention!