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Insuring Public Finances Against Natural Disasters; A Survey of Options and Recent Initiatives

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  • David J Hofman
  • Patricia A Brukoff

Abstract

Natural disasters can put severe strain on public finances, in particular in developing and small countries. But catastrophe insurance markets increasingly offer opportunities for the transfer of such risks. Thus far, developing countries have only tepidly begun to tap these opportunities. More frequent and intensive use of insurance markets may be desirable because it could help introduce an important element of predictability in the post-disaster public finances of disaster-prone developing countries. Against this background, the paper surveys the various available insurance modalities and reviews recent initiatives in developing and emerging market countries. It also identifies some key challenges for the insurance community, donors, and international financial institutions (IFIs).

Suggested Citation

  • David J Hofman & Patricia A Brukoff, 2006. "Insuring Public Finances Against Natural Disasters; A Survey of Options and Recent Initiatives," IMF Working Papers 06/199, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:06/199
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    References listed on IDEAS

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    1. Yang Dean, 2008. "Coping with Disaster: The Impact of Hurricanes on International Financial Flows, 1970-2002," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-45, June.
    2. Kenneth A. Froot & Paul G. J. O'Connell, 1999. "The Pricing of U.S. Catastrophe Reinsurance," NBER Chapters,in: The Financing of Catastrophe Risk, pages 195-232 National Bureau of Economic Research, Inc.
    3. Michael Keen & Paul K. Freeman & Muthukumara Mani, 2003. "Dealing with Increased Risk of Natural Disasters; Challenges and Options," IMF Working Papers 03/197, International Monetary Fund.
    4. Tobias N. Rasmussen, 2004. "Macroeconomic Implications of Natural Disasters in the Caribbean," IMF Working Papers 04/224, International Monetary Fund.
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    Citations

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    Cited by:

    1. Eduardo A. Cavallo & Patricio Valenzuela & Eduardo Borensztein, 2007. "La Sostenibilidad de Deuda frente a Riesgo de Catastrofes Naturales," Research Department Publications 4523, Inter-American Development Bank, Research Department.
    2. Carmen Altés, 2008. "Turismo y desarrollo en México," Research Department Publications 2008, Inter-American Development Bank, Research Department.
    3. Ghesquiere, Francis & Mahul, Olivier, 2007. "Sovereign natural disaster insurance for developing countries : a paradigm shift in catastrophe risk financing," Policy Research Working Paper Series 4345, The World Bank.
    4. Tito Cordella & Eduardo Levy Yeyati, 2015. "CATalytic insurance: the case of natural disasters," Oxford Review of Economic Policy, Oxford University Press, vol. 31(3-4), pages 330-349.
    5. Jerry R. Skees & Barry J. Barnett & Anne G. Murphy, 2008. "Creating insurance markets for natural disaster risk in lower income countries: the potential role for securitization," Agricultural Finance Review, Emerald Group Publishing, vol. 68(1), pages 151-167, May.
    6. Eduardo Cavallo & Ilan Noy, 2009. "The Economics of Natural Disasters: A Survey," Research Department Publications 4649, Inter-American Development Bank, Research Department.
    7. Sommarat Chantarat, 2015. "Index-based Risk Financing and Development of Natural Disaster Insurance Programs in Developing Countries," PIER Discussion Papers 10., Puey Ungphakorn Institute for Economic Research, revised Nov 2015.
    8. Eduardo Borensztein & Eduardo Cavallo & Patricio Valenzuela, 2009. "Debt Sustainability Under Catastrophic Risk: The Case for Government Budget Insurance," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 12(2), pages 273-294, September.
    9. Luigi Buzzacchi & Gilberto Turati, 2014. "Optimal Risk Allocation in the Provision of Local Public Services: Can a Private Insurer be Better Than a Federal Relief Fund?," CESifo Economic Studies, CESifo, vol. 60(4), pages 747-779.
    10. Eduardo Cavallo & Ilan Noy, 2010. "The Aftermath of Natural Disasters: Beyond Destruction," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 11(2), pages 25-35, July.
    11. Mahul, Olivier & Gurenko, Eugene, 2006. "The macro financing of natural hazards in developing countries," Policy Research Working Paper Series 4075, The World Bank.

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