Debt Sustainability Under Catastrophic Risk: The Case for Government Budget Insurance
AbstractNatural disasters are an important source of vulnerability in the Caribbean region. Despite being one of the more disaster-prone areas of the world, it has the lowest levels of insurance coverage. This paper examines the vulnerability of Belizeâs public finance to the occurrence of hurricanes and the potential impact of insurance instruments in reducing that vulnerability. The paper finds that catastrophic risk insurance significantly improves Belizeâs debt sustainability. In addition, the methodology employed makes it possible to estimate the appropriate level of insurance, which for the case of Belize is a maximum coverage of US$120 million per year. International organizations can play a role in assisting countries to overcome distortions in insurance markets, as well as in helping to relax internal political resistance to the purchase of insurance policies.
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Bibliographic InfoArticle provided by American Risk and Insurance Association in its journal Risk Management and Insurance Review.
Volume (Year): 12 (2009)
Issue (Month): 2 (09)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=1098-1616
Other versions of this item:
- Eduardo A. Cavallo & Patricio Valenzuela & Eduardo Borensztein, 2007. "Debt Sustainability under Catastrophic Risk: The Case for Government Budget Insurance," Research Department Publications 4522, Inter-American Development Bank, Research Department.
- Eduardo Borensztein & Eduardo A. Cavallo & Patricio Valenzuela, 2008. "Debt Sustainability Under Catastrophic Risk: The Case for Government Budget Insurance," Research Department Publications 2011, Inter-American Development Bank, Research Department.
- Eduardo A. Cavallo & Eduardo Borensztein & Patricio Valenzuela, 2008. "Debt Sustainability under Catastrophic Risk: The Case for Government Budget Insurance," IMF Working Papers 08/44, International Monetary Fund.
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