Introduction of Weather Index Insurance in Ukraine - Obstacles and Opportunities

Agricultural insurance in Ukraine is mostly offered on the basis of traditional products including PMCI, named perils and single peril coverage. The index concept was introduced in 2001 though until 2005 the insurance companies provided index crop insurance through area-based yield index program. The first weather index transactions (lack of rainfall index) were executed in 2005 for winter wheat at the South of Ukraine. The pilot project on weather index insurance was conducted by the World Bank organizations (IFC Agribusiness Development project and Commodity Risk Management Group) in 2003-2006. The project team proposed assistance in design and promotion of weather index insurance products for agricultural applications. Unfortunately, due to various reasons the project was not expanded. Although Ukraine has reasonable weather monitoring infrastructure and good data, the weather index insurance is not favored by the insurance companies due to new approach to insurance practice. The insurers and producers need to be further informed and educated about the basics of weather index insurance.