Satellite-based data for agricultural index insurance: a systematic quantitative literature review

Abstract. Index-based insurance (IBI) is an effective tool for managing climate risk and promoting sustainable development. It provides payouts based on a measurable index. Remote sensing data obtained from satellites, planes, UAVs, or drones can be used to design index-based insurance products. However, the extent to which satellite-based data has been used for different crop types and geographical regions has not been systematically explored. To bridge this gap, a systematic quantitative literature review was conducted to examine the use of satellite-based datasets in designing index-based insurance products. The review analyzed 86 global studies and found that NDVI was the most commonly used satellite-based index, accounting for approximately 77 % of all studies using satellite data. The number of studies conducted after 2010 has sharply increased and almost doubled between 2016 and 2021. The studies have shown that satellite-based vegetation indices are effective in designing and developing index-based insurance for various crops. They have also found that satellite-based vegetation health indices outperform weather indices. Most studies have focused on cereal crops, with fewer studies focusing on perennial crops. The number of studies conducted in Africa, Asia and Europe is balanced. However, the research has focused on specific countries and has not been adequately spread across different regions, especially developing countries. The review suggests that satellite-based datasets will become increasingly important in designing crop index-based insurance products. This is due to their potential to reduce basis risk by providing high-resolution with adequately long and consistent datasets for data-sparse environments. The review recommends using high spatial and temporal resolution satellite datasets to further assess their capability to reduce basis risk.