Vegetable farmers in St Philip, Barbados, check the rain gauge behind the shed most mornings. Whether that reading, or something else, decides if they get paid in a drought is being settled now. Barbados has no parametric insurance policy for farmers yet, and in August 2026 the Ministry of Agriculture, Food and Nutritional Security opened a survey asking farmers what one should look like.
Nine days after the survey opened, on 25 August 2026, the Caribbean Institute for Meteorology and Hydrology (CIMH) said El Nino conditions in the Pacific had strengthened from weak to moderate between May and July and were forecast to reach “very strong” intensity between October and December. CIMH climatologist Dr Cedric Van Meerbeeck said the conditions are likely to last into the peak of the Caribbean Dry Season in March 2027, which puts about 18 months of elevated drought risk ahead of the region.
A government is designing drought insurance before the drought arrives. The decision it makes in the next few months, which data source triggers a payout, will be hard to change once policies are sold.
What CIMH forecast, and where
- Rainfall: below normal from the Guianas through the Lesser and Greater Antilles by October 2026.
- Drought: likely by October or November over most of the Windward and Leeward Islands, the ABC islands (Aruba, Bonaire and Curacao), parts of Jamaica and Hispaniola, and parts of the Bahamas.
- Water supply: areas of the Eastern Caribbean already in drought may refill reservoirs more slowly during what should be the wettest months, September to November.
- Heat: more hot-spell days during the Caribbean Heat Season, which peaks from August to October, before the Dry Season begins around November.
Heat and drought together are worse than either alone. Hotter days raise evaporation, which pulls moisture from soil that is already getting less rain, and soil moisture is what decides whether a crop survives. This is a near-term operational forecast covering the months when Barbados wants its farmer policy in force.
Why Barbados chose parametric insurance
In June 2026 a Barbados government minister warned that insurance gaps leave homeowners, farmers and other groups exposed to climate and economic shocks. The August survey, aimed at farmers and commercial producers, followed from that warning.
| Traditional crop insurance | Parametric insurance | |
|---|---|---|
| What triggers payment | An assessor inspects the farm and measures the loss | A measured index, such as rainfall, crosses an agreed threshold |
| How fast | Often months | Days |
| Main weakness | Slow and costly to administer | Basis risk: the index can miss a real loss on a particular farm |
A farmer whose harvest has failed cannot wait months to replant. That is why speed matters, and why the choice of trigger decides whether the product works.
Basis risk: how parametric schemes fail farmers
Basis risk is the gap between what the trigger measures and what happened on the farm. A rain gauge a few kilometres away can record enough rain to keep the trigger from firing while one farmer's soil stays dry and the crop fails. Under a gauge-based policy, that farmer gets nothing for a real loss.
Index insurance schemes built on sparse weather-station networks have drawn this criticism in farming markets outside the Caribbean. Farmers who pay premiums for years and then get nothing in a season when they lost a crop stop renewing, and they tell their neighbours.
Barbados cannot afford a weather station for every district. Satellites already cover the whole island on a regular schedule, and AI models can turn that imagery into a local drought reading.
The design choice
A satellite-based index has to be specified as the trigger while the framework is being drafted. Retrofitting one onto a contract already written around a rain gauge means repricing and reselling the product.
Four things an AI-built index does that a rain gauge cannot
Reads soil and plants as well as rainfall
Satellites measure soil moisture, vegetation health (through indices such as NDVI) and evapotranspiration across the whole island. A model trained on that imagery can produce a drought severity reading for each parish, and later for individual farms, at no extra cost per farm covered.
Gets more accurate each season
A rain-gauge threshold in a contract stays fixed. If a pilot group of farms reports actual yields each season, the model can be checked against those yields and recalibrated where it was wrong, so the gap between trigger and harvest narrows over time.
Prices the season ahead
CIMH's seasonal forecasts can feed into how premiums and thresholds are set, so a year with an El Nino this strong is priced as one rather than at a long-run average that understates the risk.
Serves the whole region once
CCRIF SPC has run a multi-country parametric pool for Caribbean governments since 2007 and is developing its own drought, agriculture and flood products. If Barbados and CCRIF build separate satellite pipelines, taxpayers pay twice. A shared index would let smaller CARICOM states adopt the same trigger.
What a bad trigger would cost
The Caribbean imports most of its food, and regional food security planners treat that as a lasting weakness. A drought that cuts local yields raises produce prices when household budgets are already stretched, and an El Nino this strong may also hit some of the countries the region imports from.
A policy that pays reliably softens that shock for the farmers most exposed. A policy that misses real losses collects premiums for years, fails farmers in the season it was meant for, and puts a whole island off parametric insurance for a generation of buyers.
The weak point in my own argument is resolution. Free satellite soil-moisture products are coarse compared with a Barbadian parish, so a farm-level index needs downscaling models and ground readings to check them. That work takes seasons, and the first version of any index will be rougher than the pitch suggests.
What to do next
- Ministry of Agriculture, Barbados: before the draft framework is priced, write into the terms of reference that the trigger will be a satellite-derived soil moisture and vegetation index, with a rain-gauge index only as a fallback.
- CIMH: join the design team formally as technical partner and run a backtest of the proposed index against the island's past drought years, publishing where it would and would not have paid.
- Ministry of Agriculture extension officers: recruit a pilot group of farms across all parishes that will report yields every season for at least three seasons, so the model has ground truth to learn from.
- Barbados and CCRIF SPC: agree in writing, before either builds a data pipeline, which satellite datasets and processing each will use, so one index can serve both.
- The insurer that wins the contract: publish a public dashboard showing each parish's current index reading and the payout threshold, updated at least every ten days during the Dry Season.
Frequently Asked Questions
Where can farmers and extension officers check drought outlooks now?
CIMH's Caribbean Regional Climate Centre publishes regular drought and precipitation outlooks, and the Caribbean Climate Outlook Forum (CariCOF) issues seasonal outlooks before each wet and dry season. National meteorological services, including the Barbados Meteorological Services, localise these. Extension officers should share the outlook with farmers at the start of each season, before any drought is declared.
Which satellite data can a drought index use without licence fees?
NASA's SMAP mission and the European Space Agency's climate change initiative publish soil-moisture data free of charge, and Sentinel-2 and Landsat imagery, both free, support vegetation indices such as NDVI. Soil-moisture products are coarse, often several kilometres per pixel, so a parish-level index needs a downscaling model and ground checks. Commercial data can fill gaps at farm level, at a cost.
How can a farmer tell whether a parametric trigger is fair before buying?
Ask the insurer for a backtest: how often the trigger would have paid in each of the last 20 or 30 years, and whether those years match the droughts farmers remember. Ask what data source sets the trigger, how close the measurement point is to your land, and whether index readings are published. If the insurer cannot show a backtest, the product has not been tested.
Has parametric insurance for small producers been tried in the Caribbean?
Yes, on a small scale. CCRIF's COAST product covers fishers in Grenada and Saint Lucia against bad weather, and a Livelihood Protection Policy was piloted for low-income workers in Jamaica, Saint Lucia and Grenada. Enrolment and payout records from these schemes are the closest local evidence on how Caribbean buyers respond to index insurance.
How does CCRIF SPC differ from a farmer insurance policy?
CCRIF insures governments, not individual farmers. After Hurricane Beryl in July 2024 it paid more than USD 30 million to member governments within days, based on its hurricane models, and each government decided how to use the money. A farmer policy pays individuals directly, so it needs its own trigger at a much finer scale. The two can share satellite data while remaining separate products.