Summary of Researches on Basis Risk in Weather Index Insurance

Abstract

Agricultural weather index insurance overcomes the technology and management problems existing in traditional agricultural insurance, and can effectively transfer agricultural meteorological disasters risk, providing strong guarantee for farmers with small production scale and scattered land. Although weather index insurance has many advantages, governments around the world have made a lot of efforts to expand the coverage, but farmers' demand is still not high. One of the reasons is basis risk. How to reduce it, and improve the operational efficiency of weather index insurance is an important issue that needs to be solved urgently. This paper has summarized researches on the theories and practices of weather index insurance at home and abroad, and systematically comments on the basis risk’s definition, formation mechanism, quantitative methods and management measures. In order to provide useful ideas and references for the development of China's weather index insurance and the future research on basis risk.