UC Davis

Rice production in Cambodia faces increasing challenges due to climate variability, with frequent droughts and floods threatening yields and exacerbating food insecurity. This thesis investigates the feasibility of introducing rainfall-based index insurance as a risk management tool for rice producers in Battambang, Cambodia. The study evaluates the potential welfare benefits of six different index insurance contracts using the Relative Insurance Benefit (RIB) methodology, which compares the economic benefits of index insurance to those under perfect yield insurance and no insurance scenarios. Using CHIRPS rainfall data and yield data from a recall survey, resulting low RIB measures are explained based on variability in rice yields attributable to rainfall, the relationship between self-reported weather experiences to those detected by the index insurance contracts, and how indemnity events depict the basis risk involved in these products. Drawing from focus group discussions and key stakeholder interviews, the study considers additional feasibility factors such as farmer access to information and the role of trust in the agri-insurance sector of Cambodia. The findings suggest that while index insurance offers potential benefits to rice producers, significant challenges remain, particularly when a high quality, rainfall-based index insurance contract that improves farmer welfare is the end goal. Recommendations are provided to guide future efforts in developing and scaling up index insurance in Cambodia, with an emphasis on improving the accuracy of rainfall-based indices and enhancing farmers’ trust in these products.