Analysis of Index Insurance Potential for Adaptation to Hydroclimatic Risks in the West African Sahel

Index insurance has been viewed as a financial adaptation to climate risks with the potential for widespread application, especially in a developing world context. The potential for index insurance is explored in the context of hypothetical drought and flood contracts at the national level for farmers in the West African Sahel nations of Niger, Burkina Faso, and Mali. The region's climatology and dynamics are discussed and multiple datasets are considered as potential indices.Agricultural, precipitation, streamflow, remotely sensed vegetation, and Nino sea surface temperature indices were explored as potential bases for index insurance contract. Correlation analyses between the potential geophysical and agricultural indices are examined and two of the rainfall datasets are found to have robust positive correlations with millet production in all three nations, while a particular streamflow index is found to have a robust negative correlation with rice production in Niger. A methodological innovation of this research is the use of Gerrity skill score (GSS) analysis to analyze the indices of high correlation. The correlation and GSS analyses presented here indicate the potential for index insurance using two of the rainfall datasets for the millet crop (drought risk) of all three nations and the Niamey flood month streamflow dataset for the rice crop of Niger (flood risk).