Assessing the impact of sowing dates and ENSO in a drought index-based insurance for soybean

Abstract

Crop insurance has been an important mechanism used by farmers to protect the economic and yield losses produced by extreme weather events. Alternatively, index-based insurance (IBI) has been evaluated in many parts of the world as a mechanism to avoid moral hazard and adverse selection from traditional crop insurance products. However, there is a lack of knowledge on how the sowing date impacts the IBI triggers and tick size. In addition, few studies have evaluated how the frequency of payouts is affected by climate phenomena such as the El Niño-Southern Oscillation (ENSO). In this study, we aimed to develop a drought index based-insurance for soybean (Glycine max (L.) Merr) in the Southeastern US, where the triggers and payouts were quantified for sowing dates and ENSO phases. Simulated soybean life cycle and grain yield for multiple sites, sowing dates, and maturity groups were used to calibrate the index triggers. The index triggers were assessed based on the period of measurement, sowing time, and ENSO phase. Our results show that the accumulation of water stress between flowering and physiological maturity using quantile regression increased the accuracy of payments. The results also highlighted a higher frequency of payments triggered when soybean seasons in the Southeastern US were under La Niña influence. The results also presented larger payments generated when the soybean was sown during April and May in comparison to later sowing dates. These results could be used by insurance companies and public administration to improve the efficiency of IBI products offered.