Application of remote-sensing data in the index-based insurance design

This paper considers the use of vegetation indices built on the basis of remote-sensing data for crop insurance purposes. In our analysis we compare the capacity of two different vegetation indices calculated for critical phases of the vegetation to predict farm wheat yields in 5 counties situated in two main grain-producing regions of Kazakhstan. The results of this analysis are used for the design of index-based insurance contracts at the farm level. The risk-reducing effectiveness of the constructed insurance contracts is evaluated by calculating conditional value at risk of the farms´ wheat revenue distributions with and without insurance.