A rainfall-indexed insurance product is practical, where the statistical correlation between rainfall and cereal revenues is rather strong in the more favourable agro-climatic zones. Proportional rainfall insurance contracts would pay the insured an amount based on the shortfall in actual rainfall during a set period compared with the trigger rainfall. The contracts could be purchased in any amount, allowing farmers to insure the full amount of their expected revenue if they wish.

This paper assesses the feasibility of developing rainfall-based index insurance in Morocco as a means of providing effective and low-cost drought insurance to farmers and rural people. The paper specifically examines:

• Features of Moroccan Agriculture and weather-related risks
• Current Moroccan Drought Insurance Scheme
• Analysis of the Feasibility of Rainfall Contracts

The benefits of this program over the traditional insurance scheme used in Morocco are that it minimizes the risk of moral hazard and adverse selection and promotes a streamlined pay-out process. These features make the program more attractive to international re-insurers and investors in capital markets.