Creating insurance markets for natural disaster risk in lower income countries: the potential role for securitization
AbstractThis paper considers the potential for securitizing index-based insurance products that transfer weather and natural disaster risks from lower income countries. The paper begins with a brief overview of why markets for natural disaster risks are important in lower income countries and a review of some recent activities using index-based weather insurance. Next, the paper explains how natural disaster risks are handled in higher income countries. These examples along with the example of an innovative index-based livestock insurance pilot project in Mongolia illustrate how layers, or tranches, of natural disaster risk can be financed during the product development phase by creating structures similar to the Special Purpose Vehicles used in catastrophe bond, mortgage bond, and the emerging microfinance bond markets. We refer to these investment alternatives as micro-CAT bonds since the principal amounts would be small relative to the existing CAT bond market.
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Bibliographic InfoPaper provided by European Association of Agricultural Economists in its series 101st Seminar, July 5-6, 2007, Berlin Germany with number 9272.
Date of creation: 2007
Date of revision:
Catastrophe risk; index insurance; weather risks; socially responsible investing; reinsurance; Risk and Uncertainty;
Other versions of this item:
- Jerry R. Skees & Barry J. Barnett & Anne G. Murphy, 2008. "Creating insurance markets for natural disaster risk in lower income countries: the potential role for securitization," Agricultural Finance Review, Emerald Group Publishing, vol. 68(1), pages 151-167, September.
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