Non-structural flood risk mitigation under developing country conditions: an analysis on the determinants of willingness to pay for flood insurance in rural Pakistan

Azhar Abbas (), T. Amjath-Babu, Harald Kächele and Klaus Müller

Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, 2015, vol. 75, issue 3, 2119-2135

Abstract: The present study aims at unraveling the acceptability and potential of flood insurance as a viable mechanism to cope the financial risk associated with flood events in rural Pakistan. Moreover, the factors influencing rural households’ willingness to pay for flood insurance are also analyzed. Currently, the country faces an increasing rate of flooding due to climate change phenomenon resulting in abnormal monsoonal cycles and the melting of Himalayan glaciers in the region. The current flood management strategy of the country mainly involves ex-post relief and rehabilitation programs along with financial transfers to the flood victims from public funds without the involvement of private insurance companies. This puts enormous pressure on the public exchequer, leading to budgetary adjustments and tax escalation. Under such a scenario, flood insurance is thought to be a viable alternative to mitigate the financial risk associated with the catastrophic events like the flood that occurred in 2010. The study utilized primary level data from five districts in Pakistan to evaluate the willingness to pay for flood insurance as well as the factors affecting that willingness by using contingent valuation methodology. The results show that the acceptability of this intervention among flood victims depends on a multitude of factors such as the age of the household head, landownership, off-farm income sources and a preconception concerning the effectiveness of flood insurance. Moreover, rural families’ readiness to pay an insurance premium is not significantly influenced by perceived risk of flooding but by their financial position. Copyright Springer Science+Business Media Dordrecht 2015

Keywords: Flooding; WTP; Global warming; Instrument; Risk (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://hdl.handle.net/10.1007/s11069-014-1415-x (text/html)
Access to full text is restricted to subscribers.

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:spr:nathaz:v:75:y:2015:i:3:p:2119-2135

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/11069

DOI: 10.1007/s11069-014-1415-x

Access Statistics for this article

Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards is currently edited by Thomas Glade, Tad S. Murty and Vladimír Schenk

More articles in Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards from Springer, International Society for the Prevention and Mitigation of Natural Hazards
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().