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Index-Based Risk Financing and Development of Natural Disaster Insurance Programs in Developing Asian Countries

Author

Listed:
  • Sommarat CHANTARAT

    (Crawford School of Public Policy, The Australian National University)

  • Kirk PANNANGPETCH

    (Faculty of Agriculture, Khon Kaen University, Thailand)

  • Nattapong PUTTANAPONG

    (Faculty of Economics, Thammasat University, Thailand)

  • Thanasin TANOMPONGHANDH

    (School of Management, Mae Fah Luang University, Thailand)

Abstract

This paper explores innovations in index-based risk transfer products (IBRTPs) as a means to address important insurance market imperfections that have precluded the emergence and sustainability of formal insurance markets in developing countries, where uninsured natural disaster risk remains a leading impediment of economic development. Using a combination of disaggregated nationwide weather, remote sensing and household livelihood data commonly available in developing countries, the paper provides analytical framework and empirical illustration on showing design nationwide and scalable IBRTP contracts, to analyse hedging effectiveness and welfare impacts at the micro level, and to explore cost effective risk-financing options. Thai rice production is used in our analysis with the goal to extend the methodology and implications to enhance development of national and regional disaster risk management in Asia.

Suggested Citation

  • Sommarat CHANTARAT & Kirk PANNANGPETCH & Nattapong PUTTANAPONG & Thanasin TANOMPONGHANDH, 2013. "Index-Based Risk Financing and Development of Natural Disaster Insurance Programs in Developing Asian Countries," Working Papers DP-2013-09, Economic Research Institute for ASEAN and East Asia (ERIA).
  • Handle: RePEc:era:wpaper:dp-2013-09
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Natural disaster insurance; index insurance; reinsurance; catastrophe bond; rice production; Thailand.;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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