Satellite-Powered Crop Insurance to Protect Rice Farmers from Climate Risk in the Philippines

Smallholder rice farmers in the Philippines face increasing losses from climate hazards. Conventional indemnity-based crop insurance, while available at no cost to smallholder farmers in the Philippines, suffers from slow claims processing, subjective damage assessments and limited coverage. This study presents the development and simulation of the Area-Based Yield index insurance (ARBY) product, an innovative and scalable crop insurance solution that leverages the Philippine Rice Information System (PRISM). PRISM integrates remote sensing and crop modeling to generate monthly and seasonal estimates of rice area, planting date, and yield estimates, which are used to define homogeneous insurance zones (IZ) and estimate seasonal yields. Using six-year historical baselines (2018-2023), we parameterized the mean and variance of yields per IZ and conducted simulations for the 2023–2024 rice crop seasons in six municipalities in the Philippines. Two coverage options (80% and 90% of historical mean yield) were evaluated to balance affordability and protection. Results show that 80% coverage was cost effective for moderate-risk areas, while 90% coverage delivered greater protection in high-risk zones, at higher premiums. ARBY demonstrates significant potential to reduce financial losses from climate-induced yield shortfalls, with benefits amplified by farmer education, local government engagement, targeted subsidy schemes and continuous refinement of yield models. This study illustrates how remote sensing–based yield estimation can overcome key limitations of traditional crop insurance and strengthen climate resilience and food security in rice-based systems. By replacing costly and time-consuming farm-level loss adjustment with satellite-derived yields, ARBY addresses core limitations of traditional schemes and can improve the speed, transparency, and scale of financial protection. Through active role of the Philippine Crop Insurance Corporation (PCIC) in co-developing and piloting ARBY, the product has a clear pathway and strong potential to scale nationally.