GlobalAgRisk has undertaken three significant activities in Vietnam beginning with the development of an index insurance product against flood in the Mekong Delta. The flood product is indexed on river levels and is designed for the state agricultural bank (VBARD) to cover business interruption losses that result when client farmers seek loan restructuring following an early and severe arrival of the annual flood that disrupts and prevents their rice harvest.

The regulatory approval of the index-based business interruption insurance by the Vietnam Department of Insurance in 2008 was a milestone in being the first such contract formally approved for an agricultural context. A fully priced and reinsured contract of USD 1 million cover was offered to VBARD by a domestic insurance partner in 2008 and 2009. VBARD’s exposure for business interruption from early onset flood in Dong Thap was estimated at VND 120 billion (~ USD 7.5 million), which represents its maximum insurable sum and an ex ante genuine pre-estimate of loss.

VBARD did not purchase the contract in either year and ultimately opted to purchase provincial level area-yield insurance for rice production in 2011 to insure part of its agricultural lending portfolio. This insurance was offered through its captive insurance company, Agricultural Bank Insurance Company (ABIC), which removes the threat of subrogation.

Next, a series of agricultural insurance education workshops were held for audiences in academia, government policy analysts and research units, and finance and agriculture ministries. The workshops culminated in the publication of a four-part handbook, in Vietnamese and English that addresses the challenges of developing agricultural insurance markets. The handbooks use a structured risk assessment to guide policy initiative, illustrate project applications of the risk assessment and product development, and provide a policy vision for developing agricultural insurance in Vietnam. (An English version of the handbook can be be downloaded below).

Finally, GlobalAgRisk has designed and developed drought insurance for consequential costs and losses for coffee producers in Dak Lak Province. The insurance is indexed on rainfall at selected weather stations and indemnifies in the event of a delay in the normal start of the monsoon season. Drought during this period requires smallholder coffee producers to undertake costly additional irrigation to save their coffee crop and plants. Even with irrigation, reductions in coffee yield and quality are experienced, depending on the severity of the drought. The product was offered by a domestic insurance company holding an appropriate reinsurance contract on a fully priced policy for the 2011 drought exposure. The sum insured for policy year 2011 was 52 percent of the maximum, on average, while for policy year 2012 the level

The announcement of a government supported scheme to provide index insurance to other sectors dissipated energy and commitment to the wholly market based product, although among those involved, it was said that participation in the Project facilitated their work on the government program.  Currently, the insurance company is seeking provincial government premium support, and will make a decision whether to offer the drought product for policy year 2013.of coverage increased to 57 percent. Of the producers purchasing for policy year 2011, 50 percent re-subscribed the following year.

Further Reading:
A Policy Vision for Developing Agricultural Insurance in Vietnam
Using Index-based Risk Transfer Products to Facilitate Micro Lending in Peru and Vietnam
Skees, Hartell, and Murphy