Hydrological drought index insurance for irrigation districts in Spain

Abstract

reducing the availability of surface and groundwater sources, and giving rise to water shortages both for consumption uses and for environmental flows. Water scarcity in irrigated farming systems results in potentially greater economic losses than in rainfed systems, due to the higher investments being made on the farm.To manage water scarcity, deficit irrigation has been studied and implemented, particularly to ligneous crops, showing satisfactory results (Ruiz-Sanchez et al., 2010). Water markets are commonly used in Aus- RESEARCH ARTICLE OPEN ACCESS AbstractHydrological droughts are a major risk for irrigated agriculture in many regions of the world. The aim of this article is to propose an insurance tool to help irrigators manage the risk of water scarcity in the framework of the Spanish Crop Insurance System (SCIS). Only the United States Insurance System provides this type of coverage, but has very restrictive conditions. To determine the type of insurance scheme that better fits with the SCIS and to the Spanish irrigated agriculture, an expert panel was held with the participation of all stakeholders involved in crop insurance. Following the expert panel conclusions, an hydrological drought index insurance (HDII) addressed to irrigation districts (ID) is proposed. It would compensate water deficits suffered in the whole ID. We detail the conditions that the ID should fulfill to be eligible for HDII. HDII is applied to the Bardenas Irrigation District V (ID-V) in Spain, and the hedging effectiveness of the instrument is analyzed comparing ID-V's gross margins with and without the insurance contract. Results suggest that the proposed insurance scheme could provide an effective means of reducing farmers' vulnerability to water shortages and there is no major impediment for it to be included as a new line in the SCIS. This type of insurance can be generalized to any ID fulfilling the conditions mentioned in this paper.

The Future of Water: A Collection of Essays on “Disruptive” Technologies that may Transform the Water Sector in the Next 10 Years

“…An example of one of the early applications of such an idea was in Peru where the central banks were insured from floods, through a parametric index linked to the El Nino conditions (Khalil, Kwon, Lall, Miranda, & Skees, 2007;Skees, Hartell, & Murphy, 2007). Similar products have been developed and applied for drought and also to securitize water market option contracts and utility finances, including their use as ex ante or forecast insurance, that pays out potentially even before an event occurs in many different settings and countries (Brown & Carriquiry, 2007;Carriquiry & Osgood, 2012;Chantarat, Barrett, Mude, & Turvey, 2007;Goes & Skees, 2003;Zeff & Characklis, 2013) (Bjerge & Trifkovic, 2018;Maestro, Bielza, & Garrido, 2016). The Caribbean Risk Facility developed by the World Bank provides an example of a regional risk pooling and indexing approach.…”

Diseño de un seguro indexado para la cobertura del riesgo de sequía hidrológica en la agricultura de regadío

“…47 Maestro et al, 2016a. 48 Maestro et al, 2016b. agrícola (los embalses de regulación sólo pueden cubrir las necesidades de un año), circunstancia que difícilmente se da en las cuencas españolas con mayores riesgos de fallo de suministro. Segundo, su carácter colectivo, que dificultaría su implementación práctica al no tener en cuenta la heterogeneidad de las preferencias de los agricultores en relación con la gestión de este riesgo y de los daños ocasionados por los recortes en la dotación (planes de cultivos).…”

“…Brown y Carriquiry, 2007. Leiva y Skees, 2008. Maestro et al, 2016b Esta PR se requiere incrementar de nuevo con un "recargo se seguridad" cuando la probabilidad de ocurrencia de los siniestros no esté perfectamente caracterizada (como en el caso del seguro propuesto, dado que la serie histórica del índice está afectada por los efectos del cambio climático), o cuando el riesgo asegurado tenga un carácter sistémico (también como en el caso del seguro propuesto).…”

Insuring Water Supply in Irrigated Agriculture: A Proposal for Hydrological Drought Index-Based Insurance in Spain

“…For Mexican irrigators, Leiva and Skees [54] proposed a hydrological drought index-based insurance considering the variable 'inflow accumulation', also demonstrating that index-based insurance is fully compatible with water markets. Similarly, in Spain, Maestro et al [55] have proposed an index-based insurance scheme to cover the risk of water supply failure in irrigation districts, which is based on reservoir inflows. However, this proposal is suitable only for water supply systems with low inertia (i.e., where reservoirs can only store enough water to meet users' needs for one year or less), where situations of hydrological drought cannot be forecasted at the beginning of the hydrological year.…”