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Innovations in Index Insurance for the Poor in Lower Income Countries

  • Skees, Jerry R.
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    This article focuses on innovation in weather insurance designed to fit the special circum-stances of the poor in lower income countries where rural and agricultural financial markets are largely underdeveloped. Index insurance is an innovation that circumvents many of the fundamental problems that hamper the development of insurance for weather risks in lower in-come countries. With index insurance, payments are made based upon an objective and inde-pendent index that serves as a proxy for significant losses to crops, livestock, or other prop-erty. For example, the index can be based upon extreme rainfall measures that create either drought or flooding. Weather stations or even satellite imagery coupled with computer models can be used to create reliable “indexes†as the basis of payments. This article reviews this innovation by providing the background for its development and the motivation for using the innovation for the poor.

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    File URL: http://purl.umn.edu/44733
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    Article provided by Northeastern Agricultural and Resource Economics Association in its journal Agricultural and Resource Economics Review.

    Volume (Year): 37 (2008)
    Issue (Month): 1 (April)
    Pages:

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    Handle: RePEc:ags:arerjl:44733
    Contact details of provider: Web page: http://www.narea.org/

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    1. Rosenzweig, Mark R. & Binswanger, Hans P., 1989. "Wealth, Weather Risk and the Composition and Profitability of Agricultural Investments," Bulletins 7455, University of Minnesota, Economic Development Center.
    2. Stefan Dercon, 1993. "Risk, crop choice and savings: evidence from Tanzania," Economics Series Working Papers WPS/1993-02, University of Oxford, Department of Economics.
    3. Jerry R. Skees, 1999. "Opportunities for Improved Efficiency in Risk Sharing Using Capital Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(5), pages 1228-1233.
    4. Carter, Michael R. & Little, Peter D. & Mogues, Tewodaj & Negatu, Workneh, 2007. "Poverty Traps and Natural Disasters in Ethiopia and Honduras," World Development, Elsevier, vol. 35(5), pages 835-856, May.
    5. Barnett, Barry J. & Barrett, Christopher B. & Skees, Jerry R., 2008. "Poverty Traps and Index-Based Risk Transfer Products," World Development, Elsevier, vol. 36(10), pages 1766-1785, October.
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