Increasing the Resilience of Financial Intermediaries through Portfolio-Level Insurance against Natural Disasters
AbstractFinancial 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.
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Bibliographic InfoPaper provided by International Association of Agricultural Economists in its series 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil with number 125535.
Date of creation: Aug 2012
Date of revision:
Financial Economics; Public Economics;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-08 (All new papers)
- NEP-IAS-2012-07-08 (Insurance Economics)
- NEP-MFD-2012-07-08 (Microfinance)
- NEP-RMG-2012-07-08 (Risk Management)
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