Topic 4: On the potential value of seasonal climate forecasts for index insurance

The modern era of seasonal climate forecasts began in the late 1980s with the first successful retrospective predictions of the large 1982–83 El Niño/Southern Oscillation event using a dynamical model (Cane et al., 1986). Today, seasonal predictions are issued routinely at many national and international centers including IRI, based on both dynamical and statistical models (see Goddard et al., 2003). The purpose of this contribution is to provide some background into seasonal forecasting techniques, and to raise key issues regarding their potential value to index insurance contract design. This is a nascent field, but one poised for rapid development in view of the potential quantitative value of forecast information.