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Weather Index Insurance Can Help Households Recover from Extreme Weather Events

Author

Listed:
  • Kati Kraehnert
  • Veronika Bertram-Huemmer

Abstract

Weather index insurance is considered a promising international climate policy instrument that can help households adapt better to climate change. This is especially true in developing countries where households often suffer severely from the consequences of extreme weather events. This report is one of the first to evaluate the impact of a globally recognized index insurance, Mongolia’s Index-Based Livestock Insurance (IBLI). The empirical study is based on econometric methods and uses data from a survey of almost 1,800 households. It shows that index insurance has a clear positive effect on households: in the first three years after an extremely cold and snowy winter, insured Mongolian households are significantly better off than uninsured households in terms of their livestock, which is the key indicator of income and wealth in this context. Two years after the disaster, their herds were almost a third larger than those of uninsured households. In many places, index insurance could be a suitable measure to prevent poverty after extreme weather events.

Suggested Citation

  • Kati Kraehnert & Veronika Bertram-Huemmer, 2018. "Weather Index Insurance Can Help Households Recover from Extreme Weather Events," DIW Weekly Report, DIW Berlin, German Institute for Economic Research, vol. 8(40), pages 385-391.
    • Handle: RePEc:diw:diwdwr:dwr8-40-4
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    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.601434.de/dwr-18-40-4.pdf
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    Citations

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    Cited by:

    1. Ayako Matsuda & Kazushi Takahashi & Munenobu Ikegami, 2019. "Direct and indirect impact of index-based livestock insurance in Southern Ethiopia," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 44(3), pages 481-502, July.
    2. Mogge, Lukas, 2023. "A District-Level Analysis of the Effect of Risk Exposure on the Demand for Index Insurance in Mongolia," Ruhr Economic Papers 1018, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    3. Ella Kirchner & Oliver Musshoff, 2024. "Digital opportunities for the distribution of index‐based microinsurance: Evidence from a discrete choice experiment in Mali," Journal of Agricultural Economics, Wiley Blackwell, vol. 75(2), pages 794-815, June.

    More about this item

    Keywords

    Extreme weather events; impact evaluation; index insurance; livestock; Mongolia;
    All these keywords.

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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