Area-Based Yield Insurance (ARBY) for Cotton Producers in Pisco Valley, Peru

• Will crop insurance reduce non-price rationing in rural credit markets by increasing credit supply (reducing quantity rationing) and increasing effective demand (reducing risk rationing)?
• What is the impact of insurance on economic well-being and asset accumulation of farming households?
• What is the demand for insurance, including its price sensitivity?

Partner organizations

The Index Insurance Innovation Initiative (I4) is a new initiative to implement and to test rigorously innovations to reduce risk and poverty among small-scale agricultural and pastoralist households around the world.

The Instituto de Estudios Peruanos is a private institution dedicated to research, teaching and dissemination of social studies on Peru and other Latin American countries. Its activities seek to contribute to economic development with equity, the strengthening of democratic institutions and the recognition of the rich diversity of Peru.

Founded 69 years ago, La Positiva Seguros is one of Peru's most prominent insurers with 2 million clients and brokers covering most of the country. It is active in the provision of health, asset and accident insurance. La Positiva has a solid experience in and commitment to microinsurance, with its first such products offered in 1988.

The Caja Rural de Ahorro y Crédito (CRAC) Señor de Luren is a Peruvian rural bank which provides loans, savings, and other products. CRAC de Luren is the formal financial institution with the largest agricultural portfolio in the state of Ica, Peru. Already a marketer for La Positiva's micro life insurance products, CRAC will be the distributor for this crop insurance product by bundling it with their agricultural loans.

Product

• Payment of up to approximately USD $630 per hectare, triggered when average yield index drops below 34 quintales of cotton per hectare.
• If the insured also has a loan with CRAC, he or she will also receive a reduction of 0.25 basis points in the loan's monthly interest rate.

Evaluation design

Experimental, using geographic randomization and randomly distributed encouragement design

Data Sources:

• Administrative data
• Household survey
• In depth interviews
• Group interviews
• Experimental games

Sample size: 800 households (survey), 400 cotton producers for the experimental games

Project website(s)