Hostname: page-component-586b7cd67f-tf8b9 Total loading time: 0 Render date: 2024-11-24T19:33:51.634Z Has data issue: false hasContentIssue false
  • English
  • Français

Innovations in Index Insurance for the Poor in Lower Income Countries

Published online by Cambridge University Press:  15 September 2016

Jerry R. Skees
Jerry R. Skees*
Affiliation:
Department of Agricultural Economics at the University of Kentucky
Get access

Abstract

This article focuses on innovation in weather insurance designed to fit the special circumstances 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 income countries. With index insurance, payments are made based upon an objective and independent index that serves as a proxy for significant losses to crops, livestock, or other property. 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.

Keywords

index insurancefinancial innovation for the poorweather insurancecorrelated riskpoverty trapex ante risk management
Type
Invited Papers
Information
Agricultural and Resource Economics Review , Volume 37 , Issue 1 , April 2008 , pp. 1 - 15
Copyright
Copyright © 2008 Northeastern Agricultural and Resource Economics Association 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Anderson, J.R. 2002. “Risk Management in Rural Development: A Review.” Agriculture and Rural Development (ARD) Department Strategy Background Paper No. 7, The World Bank.Google Scholar
Barnett, B.J., Barrett, C.B., and Skees, J.R. Forthcoming. “Poverty Traps and Index-based Risk Transfer Products.” World Development (in press).Google Scholar
Barrett, C.B., and McPeak, J.G. 2005. “Poverty Traps and Safety Net.” In de Janvry, A. and Kanbur, R., eds., Poverty, Inequality, and Development: Essays in Honor of Erik Thorbecke. Norwell, MA: Kluwer Academic Publishers.Google Scholar
Bryla, E., and Syroka, J. 2007. “Developing Index-based Insurance for Agriculture in Developing Countries.” United Nations Sustainable Development Innovation Briefs, Issue No. 2.Google Scholar
Carter, M.R., Little, P.D., Mogues, T., and Negatu, W. 2005. “The Long-Term Impacts of Short-Term Shocks: Poverty Traps and Environmental Disasters in Ethiopia and Honduras.” BASIS Collaborative Research Support Program (CRSP) Brief No. 28, Department of Agricultural and Applied Economics, University of Wisconsin-Madison.Google Scholar
Dercon, S. 1996. “Risk, Crop Choice, and Savings: Evidence from Tanzania.” Economic Development and Cultural Change 44(3): 485–513.Google Scholar
Dercon, S. 2004. “Growth and Shocks: Evidence from Rural Ethiopia.” Journal of Development Economics 74(2): 309–329.Google Scholar
Hazell, P.B.R. 1992. “The Appropriate Role of Agricultural Insurance in Developing Countries.” Journal of International Development 4(6): 567–581.CrossRefGoogle Scholar
Hazell, P.B.R., and Skees, J.R. 2006. “Insuring against Bad Weather: Recent Thinking.” In Radhakrishna, R., Rao, S.K., Mahendra Dev, S., and Subbarao, K., eds., India in a Globalising World: Some Aspects of Macroeconomy, Agriculture, and Poverty. New Delhi: Academic Foundation and Hyderabad, Centre for Economic and Social Studies (CESS).Google Scholar
Hess, U., Skees, J.R., Stoppa, A., Barnett, B.J., and Nash, J. 2005. “Managing Agricultural Production Risk: Innovations in Developing Countries.” Agriculture and Rural Development (ARD) Department Report No. 32727-GLB, The World Bank.Google Scholar
Hess, U., and Syroka, J. 2005. “Weather-based Insurance in Southern Africa: The Case of Malawi.” Agriculture and Rural Development (ARD) Department Working Paper No. 13, The World Bank.Google Scholar
ISMEA (Istituto di servizi per il mercato agricolo alimentare). 2006. Risk Management in Agriculture for Natural Hazards. Rome: ISMEA.Google Scholar
Lewis, C.M., and Murdock, K.C. 1996. “The Role of Government Contracts in Discretionary Reinsurance Markets for Natural Disasters.” Journal of Risk and Insurance 63(4): 567–597.CrossRefGoogle Scholar
Mahul, O., and Skees, J.R. 2006. “Piloting Index-based Livestock Insurance in Mongolia.” Access Finance: A Newsletter Published by the Financial Sector Vice Presidency of the World Bank, Issue No. 10, The World Bank.Google Scholar
McCord, M.J. 2003. “The Lure of Microinsurance: Why MFIs Should Work with Insurers.” Briefing Note No. 1, Micro-Insurance Centre, Appleton, WI.Google Scholar
Rosenzweig, M.R., and Binswanger, H.P. 1993. “Wealth, Weather Risk and Composition and Profitability of Agricultural Investments.” Economic Journal 103(416): 56–78.Google Scholar
Skees, J.R. 1999. “Opportunities for Improved Efficiency in Risk Sharing Using Capital Markets.” American Journal of Agricultural Economics 81(5): 1228–1233.CrossRefGoogle Scholar
Skees, J.R. 2003. “Risk Management Challenges in Rural Financial Markets: Blending Risk Management Innovations with Rural Finance.” Thematic Paper presented at the USAID conference “Paving the Way Forward for Rural Finance: An International Conference on Best Practices,” Washington, D.C. (June 2-4).Google Scholar
Skees, J.R., and Barnett, B.J. 1999. “Conceptual and Practical Considerations for Sharing Catastrophic/Systemic Risks.” Review of Agricultural Economics 21(2): 424–441.Google Scholar
Skees, J.R., and Barnett, B.J. 2006. “Enhancing Micro Finance Using Index-based Risk Transfer Products.” Agricultural Finance Review 66(2): 235–250.Google Scholar
Skees, J.R., Goes, A., Sullivan, C., Carpenter, R., Miranda, M.J., and Barnett, B.J. 2006. “Index Insurance for Weather Risk in Low Income Countries.” Report prepared for the USAID Microenterprise Development (MD) Office, USAID/DAI Prime Contract LAG-I-00-98-0026-00 BASIS Task Order 8, Rural Finance Market Development.Google Scholar
Syroka, J., and Wilcox, R. 2006. “Rethinking International Disaster and Finance.” Journal of International Affairs 59(2): 197–214.Google Scholar