Mitigating risk for floodplain agriculture in Amazonia: a role for index-based flood insurance

ABSTRACT

The fertile floodplain of the Amazon river offers considerable potential for agriculture, yet it is a risk-filled environment with heightened vulnerability due to climate change. The annual flood pulse deposits nutrient-rich sediment on the floodplain enabling increased agricultural productivity during the low water season. However, crops growing on the floodplain are at high risk of loss due to flood dynamics. Drawing on data from household surveys (n = 83), focus group discussions, and key informant interviews, this study assesses potential flood risk mitigation tools for floodplain rice farmers along the Amazon river near Iquitos, Peru. Farmers’ risk mitigation preferences are explored through willingness to pay (WTP) methods for flood-tolerant rice varieties, river information services, and index-based flood insurance. Results indicate that measured ambiguity aversion is a key driver in the decision to mitigate flood risk. The study suggests that the environmental risk context may be appropriate for an index-based flood insurance product, and farmers and local institutions see the promise of flood insurance. With climate change scenarios predicting greater variability in the flood regime, mitigating flood risk is paramount to reducing the vulnerabilities and unlocking opportunities for floodplain farmers in Amazonia.

KEYWORDS:

• Floodplain agriculture
• risk mitigation
• floods
• ambiguity aversion
• index insurance

Acknowledgements

Foremost, the authors are deeply grateful to the families and farmers of the four study communities. They generously provided their time and energy to the research project and opened their homes to the research team. We acknowledge the dedicated field research assistance provided by Mayra Ly Quevedo Guerrero. We thank two reviewers for insightful and constructive comments.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 While the distinction between risk and ambiguity is related to the notion of Knightian uncertainty, for the purposes of this paper, we follow the Klibanoff, Marinacci, and Mukerji (2005) conceptualization of ambiguity.

2 Notable examples of flood insurance schemes to date include a 2013 meso-level catastrophic flood insurance scheme in Bangladesh with Oxfam; the Index-based Flood Insurance pilot in India using remote sensing technologies and data to determine depth and duration of flood levels (International Water Management Institute, 2017); a meso-level pilot in Vietnam on early flooding impacts on rice in the Mekong Delta (Lotsch et al., 2010); and, a feasibility study in Thailand (Hellmuth et al., 2009).

Additional information

Funding

This work was supported by the Social Science and Humanities Research Council of Canada and the Fonds de Recherche du Québec—Société et Culture.

Notes on contributors

Geneva List

Geneva List completed her Master's degree in Geography with Development Studies at McGill University. She works at the International Research Institute for Climate and Society at Columbia University where she provides technical support and conducts participatory processes with local farmers and stakeholders to facilitate climate risk mitigation and risk transfer in the Global South. Her research interests include: disaster risk reduction, climate change adaptation, food security, and sustainable agriculture. She worked at the Inter-American Development Bank building partnerships for climate finance and agriculture from 2016-2017 and in climate change policy at the former Canadian International Development Agency (2012-2013). She has published in Natural Hazards and the Journal of Hydrology.

Sonia Laszlo

Sonia Laszlo is Associate Professor of Economics at McGill University, specializing in applied microeconomic analysis in developing economies. Her research areas include decision-making under uncertainty (technology adoption among subsistence farmers) and the micro-economic effects of social policies with a focus on women. Prof. Laszlo has conducted her research in Peru, Kenya and in the Caribbean, using laboratory experiments, surveys or randomized controlled trials. She is a Fellow of CIRANO in Montreal and affiliated researcher at Peru's Group for the Analysis of Development. She was director of McGill's Institute for the Study of International Development between 2016 and 2019.

Oliver T. Coomes

Oliver T. Coomes is Professor of Geography at McGill University who works on issues related to environment and development in tropical rainforest forests and forest communities of Amazonia and elsewhere in tropical Latin America, including peasant livelihoods, poverty traps, land cover change, adaptation to environmental change, and agrobiodiversity. He served as Editor-in-Chief of World Development (2003-2012). His published work includes more than 70 journal articles in a wide range of thematic and interdisciplinary journals and one co-authored book.