Challenges for Use of Index-Based Weather Insurance in Lower-Income Countries

This overview document provides a perspective on the progress and challenges associated with index-based risk transfer products (IBRTPs) in lower income countries. Effectively, IBRTPs are a proxy for loss and a vehicle to transfer risk to insurance or capital markets. These products are designed to pay out when an independent physical measure of a loss (such as extreme weather, area yields, or even complex process models that use satellite images) crosses a threshold value of the index that indicate catastrophic conditions are creating serious problems for clients.