Floods are a major source of risk forthe agricultural sector. Flood risk in the agriculturalsector primarily arises from river flooding, flash floods,and coastal flooding. The impacts of floods can result insizable agricultural damages at the local level. Floods inagricultural zones expose agricultural producers,agricultural supply chains, rural financial institutions(such as agricultural banks), and governments to financialrisks due to the loss of crops, delinquency on seasonalproduction loans, damage to infrastructure and loss ofpublic revenues. The costs associated with these damages areoften absorbed by households directly or governments thatprovide compensation to agricultural producers in theaftermath of catastrophic flood events. Rural financialinstitutions also absorb the cost of floods through loanrescheduling or, in catastrophic cases, loan cancellation.In many developing countries, floods are dealt with in areactive, rather than proactive, manner and little is doneto be financially prepared for a catastrophic outcome offloods. Going forward, government and donors can play animportant role to facilitate the development of riskspreading mechanisms in general and agricultural floodinsurance in particular. First, this includes investment inthe generation of public goods to support disaster riskreduction and recovery, risk management, and ultimatelyinsurance applications. Second, awareness building and riskeducation are essential for better risk management andinsurance. In that vein, identifying and assessing floodrisk is critical first steps. Third, many of thetechnologies described here have applications beyondinsurance, including for better planning, risk reduction,early warning, and disaster response. Insurance cancomplement such activities, but is only viable if carriedout jointly as part of a broader risk management framework.Fourth, more research and technical assistance is needed todevelop simple and financially viable products for floodrisk transfer at aggregate levels; there is increasingdemand expressed for such products from flood-pronecountries. Finally, donors and government can supportinternational and regional centers involved in floodmodeling and facilitate a platform that convenes thetechnical expertise required for flood risk insurancedevelopment. Several of such centers and core expertiseswere identified through this work.
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