Climate variability intensifies weather risks across smallholder rainfed farming systems in Africa. Farmers often respond by minimizing the use of modern inputs and opting for low-cost traditional practices, a strategy that decreases average yields and perpetuates poverty. While crop insurance could incentivize greater adoption of inputs, indemnity-based programs face market failures. Weather index insurance (WII), which utilizes objective weather data to trigger payouts while addressing traditional crop insurance market failures, is a viable solution. However, empirical evidence on the impact of WII remains limited, with most studies relying on controlled experiments or hypothetical scenarios that overlook real-world adoption dynamics. This study analyzed observational data from 400 smallholder farmers across diverse agroecological zones in Njoro Sub-County, Kenya, using instrumental variable regression to evaluate the impact of weather index insurance (WII) on input adoption and intensity of use. Findings indicated that WII significantly increased the adoption and intensification of improved inputs while displacing traditional practices, with effects moderated by gender, financial access, and infrastructure. Specifically, active WII users applied 28.7 kg/acre more chemical fertilizer and used 2.6 kg/acre more hybrid maize seeds while reducing manure and traditional seed usage by 27 kg/acre and 2.9 kg/acre, respectively. However, the effectiveness of WII was context-dependent, varying under extreme drought conditions and in high-fertility soils, which directly affected resilience outcomes. These findings suggest that policies should combine insurance with targeted agroecological practices and complementary measures, such as improved access to credit and gender-sensitive extension programs tailored to the specific needs of women farmers, to support sustainable agricultural transformation.

Climate variability discourages smallholders from adopting yield-enhancing inputs, perpetuating low agricultural productivity. Weather Index Insurance (WII) could mitigate this, but empirical evidence remains inconsistent, with most insights drawn from controlled experiments lacking real-world scalability. Using observational data from Kenyan smallholders across diverse agroecological zones, this study employs instrumental variable regression to assess WII's influence on agricultural input adoption and use intensity. Results demonstrate that WII significantly increases adoption and intensification of improved inputs but displaces traditional practices, with effects mediated by gender, financial access, and infrastructure. However, WII's efficacy diminishes under extreme drought and in high-fertility soils, revealing threshold-dependent climate resilience shaped by local agroecological conditions. Our results demonstrate that WII's productivity benefits are context-dependent, urging policies that combine insurance with agroecological targeting and complementary interventions like credit access to achieve sustainable agricultural transformation.