VIDEO: Designing Insurance with Dominican Dairy Producers

Over the last year, the financial instruments sector team at IRI has been working in the Dominican Republic to design an index insurance product for the country’s dairy producers. This work has been part of the Climate Resiliency and Index Insurance Program (CRII), funded by the USAID office in the Dominican Republic. In a new video, we show how researchers and dairy producers worked together to design and test the insurance product in the spring of 2014. In the months that followed, the team worked to further refine the product, and now they are currently marketing it to dairy farmers in the Northwest region of the country. The commercial product will be offered through a local bank, Banco ADOPEM, which is looking forward to expanding its market in the sector and region. The bank will be working together with the project partners to execute sign-ups for policies beginning in February 2015. Turn on captions for English/Spanish subtitles.

Index insurance for agriculture is a financial mechanism that can encourage prudent development while broadly distributing the climate risks faced by farmers. For farmers that depend heavily on rainfall to water their crops or feed their animals, the uncertainty around how much rain will fall during a season can make investing in and growing their farms prohibitively risky. Index insurance reduces this risk by offering farmers who purchase the insurance a guarantee that if they experience drought they will be compensated accordingly. Farmers are still incentivized to maximize their production because the payout depends on rainfall, not crop yields, and the rainfall is measured objectively by rain gauges or satellite data.

Financial mechanisms like index insurance are sometimes unfamiliar and may cause confusion or resistance among farmers and other stakeholders. Researchers increase familiarity through interactive exercises and participatory discussion, which also allows financial products to be tailored to the needs of those who will use them. These tools help new social and economic institutions take root, building resilience to climate extremes that can last long after the researchers’ involvement. This work can be especially effective in communities where adaptation to seasonal and interannual climate variability and longer-term climate change is necessary but unfamiliar. Learn more about our financial instruments work in the Dominican Republic and beyond.