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

Sommarat Chantarat

No 10, PIER Discussion Papers from Puey Ungphakorn Institute for Economic Research

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 illustrations on how to 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 of extending the methodology and implications so as to enhance the development of national and regional disaster risk management in Asia.

Keywords: Natural disaster insurance; Agricultural insurance; Risk pooling; Securitization; Rice production; Thailand (search for similar items in EconPapers)
JEL-codes: D81 G22 Q12 Q14 Q18 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2015-11
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Citations: View citations in EconPapers (2)

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