Climate-Based Agri-Insurance Method for Paddy Production in Sri Lanka

Abstract

Climate change has emerged as a major threat to agriculture globally, and Sri Lanka is no exception. The districts of Ampara, Anuradhapura, and Polonnaruwa are the main producers of paddy. In recent decades, these regions have experienced greater climate variability, leading to unstable harvests and posing financial risks for paddy farmers. This study examines the potential of Weather Index Insurance (WII) as an effective tool to mitigate income losses caused by extreme weather events. Historical data on paddy yields were combined with daily weather records. The analysis focused on relationships between paddy yields and weather variables: total rainfall, average temperature, maximum and minimum temperatures, and extreme monthly temperatures in the regions for both the Maha and Yala cultivation seasons. Regression models identified significant correlations, and insurance indices were designed for each district and season, with pure premiums calculated based on these relationships. The results indicate that total rainfall is the most significant factor influencing yield variability across all three districts in different seasons. The proposed insurance models were able to reduce income variability by 15–19%. These findings indicate that rainfall is the most reliable basis for climate-resilient paddy insurance in these regions. This data-driven framework for index-based agricultural insurance provides insights to enhance farmer resilience, reduce economic vulnerability for farmers, and support the long-term sustainability of production in those regions.