Economic indicators of hydrologic drought insurance under water demand and climate change scenarios in a Brazilian context

Guilherme Samprogna Mohor and Eduardo Mario Mendiondo

Ecological Economics, 2017, vol. 140, issue C, 66-78

Abstract: Developing countries face large losses to extreme natural hazards. Regarding droughts, planning instruments are important for managing water resources and diminishing the losses. Under increasing demand scenario, varied criteria should be incorporated indicating society's capacity to bear the consequences. Here we present a Brazilian-contextualized insurance model and suggest its outputs as complementary criteria to assist water resources management and to inform the stakeholders. From the streamflow simulated using hydrologic models driven by a climate scenario, we applied the Hydrologic Risk Transfer Model (MTRH-SHS), an insurance fund simulator under a multi-year policy, to assess sustainability indicators and the premiums a community would pay to cover the expenses of water deficits. Multiple scenarios generated with MTRH-SHS link water yield and seasonality related to both premium and loss ratios. A 20% increase in water demand elevates the premium up to 0.1% of a local GDP. Even under current demand, premiums may surpass 0.5% of GDP because of changes in the hydrologic regime. Proportionally, more seasonal or varied regimes result in more heterogeneous loss events, which in turn is linked to higher insurance premiums. MTRH-SHS might raise awareness for decision-makers to cope with drought under changing water demand and climate in the Brazilian context.

Keywords: Brazil; Risk transfer; Water security; Drought risk; SWAT; MHD (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0921800917300587
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolec:v:140:y:2017:i:c:p:66-78

DOI: 10.1016/j.ecolecon.2017.04.014

Access Statistics for this article

Ecological Economics is currently edited by C. J. Cleveland

More articles in Ecological Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().