Basis risk in weather index insurance

Abstract

Nowadays the planet faces a problem of climate change giving rise to a frequency of climatic phenomena below or above the normal such as a rarity or an excess of the rainfall leading respectively to drought and floods in certain localities, cyclones, storms, temperature, etc. Face to this uncertainty of the occurrence of these events which are considered as risks, human being generally risk-averse, to protect themselves against these risks new form of insurance called weather insurance was created.