Statistical analysis for satellite-index-based insurance to define damaged pasture thresholds

Abstract

Vegetation indices based on satellite images, such as the normalized difference vegetation index (NDVI), have been used in countries like the USA, Canada and Spain for damaged pasture and forage insurance over the last few years. This type of agricultural insurance is called satellite-index-based insurance (SIBI). In SIBI, the occurrence of damage is defined as normal distributions. In this work a pasture area at the north of the Community of Madrid (Spain) has been delimited by means of Moderate Resolution Imaging Spectroradiometer (MODIS) images. A statistical analysis of NDVI histograms was applied to seek for alternative distributions using the maximum likelihood method and 2 test. The results show that the normal distribution is not the optimal representation and the generalized extreme value (GEV) distribution presents a better fit through the year based on a quality estimator. A comparison between normal and GEV is shown with respect to the probability under a NDVI threshold value throughout the year. This suggests that an a priori distribution should not be selected and a percentile methodology should be used to define a NDVI damage threshold rather than the average and standard deviation, typically of normal distributions.