Creating insurance markets for natural disaster risk in lower income countries: the potential role for securitization
This 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.
|Date of creation:||2007|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.eaae.org|
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- John G. McPeak & Christopher B. Barrett, 2001. "Differential Risk Exposure and Stochastic Poverty Traps Among East African Pastoralists," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 674-679.
- Rosenzweig, Mark R. & Binswanger, Hans P., 1989.
"Wealth, Weather Risk and the Composition and Profitability of Agricultural Investments,"
7455, University of Minnesota, Economic Development Center.
- Rosenzweig, Mark R & Binswanger, Hans P, 1993. "Wealth, Weather Risk and the Composition and Profitability of Agricultural Investments," Economic Journal, Royal Economic Society, vol. 103(416), pages 56-78, January.
- Rosenzweig, Mark R. & Binswanger, Hans P., 1992. "Wealth, weather risk, and the composition and profitability of agricultural investments," Policy Research Working Paper Series 1055, The World Bank.
- Goes, Anne & Skees, Jerry R., 2003. "Financing Natural Disaster Risk Using Charity Contributions And Ex Ante Index Insurance," 2003 Annual meeting, July 27-30, Montreal, Canada 22188, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Jerry R. Skees & Barry J. Barnett, 2006. "Enhancing microfinance using index-based risk-transfer products," Agricultural Finance Review, Emerald Group Publishing, vol. 66(2), pages 235-250, September.
- Hogarth, Robin M & Kunreuther, Howard, 1989. " Risk, Ambiguity, and Insurance," Journal of Risk and Uncertainty, Springer, vol. 2(1), pages 5-35, April.
- Colin F. Camerer & Howard Kunreuther, 1989. "Decision processes for low probability events: Policy implications," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 8(4), pages 565-592.
- repec:ags:nc2006:133091 is not listed on IDEAS
- Dercon, Stefan, 1998.
"Wealth, risk and activity choice: cattle in Western Tanzania,"
Journal of Development Economics,
Elsevier, vol. 55(1), pages 1-42, February.
- Stefan Dercon, 1996. "Wealth, risk and activity choices: cattle in Western Tanzania," Economics Series Working Papers WPS/1996-08, University of Oxford, Department of Economics.
- Stefan Dercon, 1996. "Wealth, risk and activity choices: cattle in Western Tanzania," CSAE Working Paper Series 1996-08, Centre for the Study of African Economies, University of Oxford.
- 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.
- David Hofman & Patricia Brukoff, 2006. "Insuring Public Finances Against Natural Disasters; A Survey of Options and Recent Initiatives," IMF Working Papers 06/199, International Monetary Fund.
- Skees, Jerry & Varangis, Panos & Larson, Donald & Siegel, Paul, 2002.
"Can Financial Markets be Tapped to Help Poor People Cope with Weather Risks?,"
Working Paper Series
UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
- Skees, Jerry & Varangis, Panos & Larson, Donald & Siegel, Paul, 2002. "Can financial markets be tapped to help poor people cope with weather risks ?," Policy Research Working Paper Series 2812, The World Bank.
- Neil A. Doherty, 1997. "Financial Innovation in the Management of Catastrophe Risk," Journal of Applied Corporate Finance, Morgan Stanley, vol. 10(3), pages 84-95.
- Chen, Shaohua & Ravallion, Martin, 2007. "Absolute poverty measures for the developing world, 1981-2004," Policy Research Working Paper Series 4211, The World Bank.
- Michael Carter & Christopher Barrett, 2006. "The economics of poverty traps and persistent poverty: An asset-based approach," Journal of Development Studies, Taylor & Francis Journals, vol. 42(2), pages 178-199.
- Neil A. Doherty, 1997. "Financial Innovation in the Management of Catastrophe Risk," Center for Financial Institutions Working Papers 98-12, Wharton School Center for Financial Institutions, University of Pennsylvania.
When requesting a correction, please mention this item's handle: RePEc:ags:eaa101:9272. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If references are entirely missing, you can add them using this form.