This paper is dedicated exclusively to index insurance as a risk management instrument in agriculture with the forward thinking of applying satellite data and technologies to enhance the existing insurance solutions, covering the traditional indemnity and index insurance products.

Index/Parametric insurance is often defined as a type of insurance that covers the probability of a predefined event happening instead of indemnifying the actual loss incurred.2 This definition represents a certain issue when index insurance contract does not cover an actual loss or pays when the insured farmer did not experience a loss, also known as the basis risk.

Currently, the index insurance paradigm is being reconsidered. It is no longer perceived as a “silver bullet” capable of substituting the indemnity insurance. Munich Re specifies that “parametric products provide a simple and transparent coverage concept for insurers, businesses and the public sector alike. They complement traditional insurance coverage for policyholders aiming to reduce their risk exposure and can cover risks that have traditionally been uninsurable”.