Climate impacts and biological threats are increasingly affecting Pakistan’s agriculture, leaving farmers vulnerable to significant financial losses. Pakistan Agricultural Coalition has led the development of a robust crop insurance model, Area-Yield Index Insurance, with the participation of local and international insurance and insuretech firms.
PAC successfully piloted this solution over three seasons in three different crops. First, during the wheat season (2021-22) by insuring farmer loans of HBL and Bank of Punjab which led to insurance payments for farmers affected by the heatwave of 2022. Then, two payouts in 2023 took place as well, one due to the Sutlej over flow in Pakpattan in the rice paddy crop and one as a result of the whitefly attack on cotton in district Rahim Yar Khan (corporate agriculture on 500 acres).
The type of crop insurance best suited for small farmers is Area Yield Index-based Insurance (AYII). In AYII, if the yield in a specified area goes a certain level below the area’s historical average yield, then farmers in the area receive a pay out. By using statistical methods, satellite data, and crop cuts on a random selection of the area’s farms to determine the average yield, AYII eliminates the administrative cost of going to each individual small farm for a survey which would be prohibitively expensive. Since AYII is linked to the average yield of the area, it allows for multiple factors that may affect crops such as heat waves, pest attack, diseases, etc.
Most recently, PAC has convinced the Government of Sindh to pilot this model in a few districts.
