This paper focuses on private and public mechanisms for managing such covariate risk for natural disasters. When many households within the same community face risks that create contemporaneous losses for all, traditional coping mechanisms are likely to fail. Such covariate risks are not uncommon in many developing countries, especially where farming remains a major source of income. The paper focuses on risks that are related to weather events (excess rain, droughts, freezes, high winds, etc.) that have a severe impact on rural incomes. Weather insurance could cover the covariate risk for a community of poor households through formal and informal risk-sharing arrangement among households that are purchasing these weather contracts. The paper argues that a key issue of delivering insurance to small farmers is the existence of producer organizations and uses the case study of Mexico to analyze this theory.