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Index-Based Risk Financing and Development of Natural Disaster Insurance Programs in Developing Asian Countries

Sommarat Chantarat (), Kirk Pannangpetch, Nattapong Puttanapong () and Thanasin Tanomponghandh
Additional contact information
Kirk Pannangpetch: Faculty of Agriculture, Khon Kaen University, Thailand
Thanasin Tanomponghandh: School of Management, Mae Fah Luang University, Thailand

No DP-2013-09, Working Papers from Economic Research Institute for ASEAN and East Asia (ERIA)

Abstract: This paper explores innovations in index-based risk transfer products (IBRTPs) as a means to address important insurance market imperfections that have precluded the emergence and sustainability of formal insurance markets in developing countries, where uninsured natural disaster risk remains a leading impediment of economic development. Using a combination of disaggregated nationwide weather, remote sensing and household livelihood data commonly available in developing countries, the paper provides analytical framework and empirical illustration on showing design nationwide and scalable IBRTP contracts, to analyse hedging effectiveness and welfare impacts at the micro level, and to explore cost effective risk-financing options. Thai rice production is used in our analysis with the goal to extend the methodology and implications to enhance development of national and regional disaster risk management in Asia.

Keywords: Natural disaster insurance; index insurance; reinsurance; catastrophe bond; rice production; Thailand. (search for similar items in EconPapers)
JEL-codes: G12 G22 O53 Q11 Q54 (search for similar items in EconPapers)
Pages: 65 pages.
Date: 2013-08
New Economics Papers: this item is included in nep-cwa, nep-ias, nep-rmg and nep-sea
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http://www.eria.org/ERIA-DP-2013-09.pdf (application/pdf)

Related works:
Chapter: Index-Based Risk Financing and Development of Natural Disaster Insurance Programs in Developing Asian Countries (2015)
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