Increasing the Resilience of Financial Intermediaries through Portfolio-Level Insurance against Natural Disasters

Benjamin Collier and Jerry R. Skees

No 125535, 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil from International Association of Agricultural Economists

Abstract: Financial intermediaries [FIs] in developing and emerging economies are poorly equipped to manage natural disasters. These events create losses for FIs, eroding capital reserves and compromising their ability to lend. Portfolio-level insurance against disasters can improve FI management of these events. We model microfinance intermediaries [MFIs] exposed to severe El Niño in Peru that can now insure against this disaster risk. Our analyses suggest that insurance allows these lenders to manage this risk more efficiently and effectively. These risk management improvements can translate into better financial performance, expansion of banking service outreach, lower interest rates, and reduced volatility in access to credit. Based on these analyses, a large MFI in Peru with which we collaborated is now managing its disaster risk using El Niño insurance.

Keywords: Financial Economics; Public Economics (search for similar items in EconPapers)
Pages: 32
Date: 2012-08
New Economics Papers: this item is included in nep-ias, nep-mfd and nep-rmg
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Citations: View citations in EconPapers (13)

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Journal Article: Increasing the resilience of financial intermediaries through portfolio-level insurance against natural disasters (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:iaae12:125535

DOI: 10.22004/ag.econ.125535

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