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... for a premium, where the contract specifies the payout as a function of the ... of fixed tran... more ... for a premium, where the contract specifies the payout as a function of the ... of fixed transaction costs or discrete insurance, a risk averse subjective expected utility maximiser would buy a ... requirements for insurance companies in the UK started with the Life Assurance Companies ...
... throughout the project. Thanks also to Sujoy Mukerji, Marcel Fafchamps, Simon Quinn, Catherin... more ... throughout the project. Thanks also to Sujoy Mukerji, Marcel Fafchamps, Simon Quinn, Catherine Porter, Glenn Harrison, Ruth Vargas Hill, Liam Wren-Lewis and subjects at seminars at Oxford University. Solomon Ambessie, Zewdu ...
The African Risk Capacity (ARC) pool is a proposed pan-Africa drought risk pool that would insure... more The African Risk Capacity (ARC) pool is a proposed pan-Africa drought risk pool that would insure against drought risk in Africa south of the Sahara. Donors and, to at least a notional extent, member countries would pay annual premiums. In return, if, for instance, satellite weather indexes call for a response to a severe drought, the pool would make timely claim payments to insured governments. To be eligible to join the ARC pool, each government would have to develop a contingency plan that describes how it will use any claim payments. If fully operationalized, the ARC pool will mark a major change in how donors fund emergency support to countries in Africa during times of need.
SSRN Electronic Journal, 2000
ABSTRACT Governments play a key role in supporting populations affected by natural disasters, inc... more ABSTRACT Governments play a key role in supporting populations affected by natural disasters, including rebuilding infrastructure to ensure continued services and scaling-up public safety nets to prevent widespread hunger and poverty. However, the traditional approach of limiting greater spending to the aftermath of a disaster has many drawbacks. External support from bilateral or multilateral donors can be slow and unreliable. Private sector reinsurance can be prohibitively expensive. And reallocating budgets toward recovery and reconstruction is typically a slow process that can even hurt long-term development by drawing resources away from effective programs. Some countries are trying to mitigate this liability by banding together and creating sovereign catastrophe risk pools that allow governments to coordinate with one another to insure their uncertain fiscal liabilities at lower cost. Countries contribute to the pool, which then provides payments if an insured natural disaster strikes. The African Risk Capacity (ARC), has been proposed as a pan-Africa drought risk pool to insure against drought risk in Africa south of the Sahara. If fully operationalized, the ARC will mark a major change in how donors fund emergency support to countries in Africa during times of need. In this paper, we undertake a cost-benefit analysis of the ARC pool and discuss how lessons can inform the design of the ARC.
... Thanks also to Olivier Mahul, Liam Wren-Lewis, Ruth Vargas Hill and participants at seminars ... more ... Thanks also to Olivier Mahul, Liam Wren-Lewis, Ruth Vargas Hill and participants at seminars at Oxford University. Any remaining errors are my own. ESRC funding is gratefully acknowledged. 1 Page 2. However, weather derivatives have proved challenging to sell. ...
Economics Series Working Papers, 2011
... Thanks also to Rocco Macchiavello, Ian Jewitt, Francis Teal, John Thanassoulis, LiamWren-Lewi... more ... Thanks also to Rocco Macchiavello, Ian Jewitt, Francis Teal, John Thanassoulis, LiamWren-Lewis, Joe Perkins and participants at seminars at Oxford University. Any remaining errors are my own. 1 Page 2. 1 Introduction Being poor in a poor country is risky. ...
This paper considers the potential role of government in aiding the scale-up of high quality inde... more This paper considers the potential role of government in aiding the scale-up of high quality index insurance products in developing countries. In particular, we analyse optimal public policy in light of the fact that index insurance policies are typically credence goods -that is, the basis risk of a given policy cannot be distinguished by consumers before purchase and only to a limited extent after purchase. We discuss two potential market failures that stem from this property that governments may seek to correct: low takeup and low investment in reducing basis risk. In each case, we consider the costs and benefits of various alternative government policies. We show that policies aimed to improve take-up may improve or worsen incentives for investment, and that the precise nature of these effects will depend on the government's ability to commit, the marginal cost of funds, and their potential to identify the inputs necessary for constructing a high quality index.
Environmental Science Policy, Mar 1, 2013
Disaster risk financing Natural disasters a b s t r a c t Providing disaster microinsurance to lo... more Disaster risk financing Natural disasters a b s t r a c t Providing disaster microinsurance to low income individuals is far from easy. Designing and structuring products so that they can be sold at low cost raises a set of challenges, and even then the level of voluntary purchase can be disappointingly low. Recent innovations in providing agricultural insurance could have broad implications for other disaster microinsurance products. If a market is to be viable governments will have key roles to play, including: approving insurance policy small print and product designs; supporting or leading industry-wide investments in data collection, index design, and loss adjustment capacity; financing sustained public information campaigns; nudging or compelling purchase; and committing to limits on post-disaster financial assistance to the uninsured. If disaster microinsurance prices do not accurately reflect the risks faced, the presence of disaster microinsurance can distort incentives to migrate. However, in the presence of riskbased pricing, it seems plausible that disaster microinsurance could make it easier for people to stay where they are even as their environment becomes more fragile, yet increase post-disaster migration through increasing post-disaster wealth.
SSRN Electronic Journal, 2000
This paper considers the potential role of government in aiding the scale-up of high quality inde... more This paper considers the potential role of government in aiding the scale-up of high quality index insurance products in developing countries. In particular, we analyse optimal public policy in light of the fact that index insurance policies are typically credence goods -that is, the basis risk of a given policy cannot be distinguished by consumers before purchase and only to a limited extent after purchase. We discuss two potential market failures that stem from this property that governments may seek to correct: low takeup and low investment in reducing basis risk. In each case, we consider the costs and benefits of various alternative government policies. We show that policies aimed to improve take-up may improve or worsen incentives for investment, and that the precise nature of these effects will depend on the government's ability to commit, the marginal cost of funds, and their potential to identify the inputs necessary for constructing a high quality index.
Applied Economic Perspectives and Policy, 2014
Annals of Actuarial Science, 2014
Policy Research Working Papers, 2012
Policy Research Working Papers, 2012
Policy Research Working Papers, 2012
... for a premium, where the contract specifies the payout as a function of the ... of fixed tran... more ... for a premium, where the contract specifies the payout as a function of the ... of fixed transaction costs or discrete insurance, a risk averse subjective expected utility maximiser would buy a ... requirements for insurance companies in the UK started with the Life Assurance Companies ...
... throughout the project. Thanks also to Sujoy Mukerji, Marcel Fafchamps, Simon Quinn, Catherin... more ... throughout the project. Thanks also to Sujoy Mukerji, Marcel Fafchamps, Simon Quinn, Catherine Porter, Glenn Harrison, Ruth Vargas Hill, Liam Wren-Lewis and subjects at seminars at Oxford University. Solomon Ambessie, Zewdu ...
The African Risk Capacity (ARC) pool is a proposed pan-Africa drought risk pool that would insure... more The African Risk Capacity (ARC) pool is a proposed pan-Africa drought risk pool that would insure against drought risk in Africa south of the Sahara. Donors and, to at least a notional extent, member countries would pay annual premiums. In return, if, for instance, satellite weather indexes call for a response to a severe drought, the pool would make timely claim payments to insured governments. To be eligible to join the ARC pool, each government would have to develop a contingency plan that describes how it will use any claim payments. If fully operationalized, the ARC pool will mark a major change in how donors fund emergency support to countries in Africa during times of need.
SSRN Electronic Journal, 2000
ABSTRACT Governments play a key role in supporting populations affected by natural disasters, inc... more ABSTRACT Governments play a key role in supporting populations affected by natural disasters, including rebuilding infrastructure to ensure continued services and scaling-up public safety nets to prevent widespread hunger and poverty. However, the traditional approach of limiting greater spending to the aftermath of a disaster has many drawbacks. External support from bilateral or multilateral donors can be slow and unreliable. Private sector reinsurance can be prohibitively expensive. And reallocating budgets toward recovery and reconstruction is typically a slow process that can even hurt long-term development by drawing resources away from effective programs. Some countries are trying to mitigate this liability by banding together and creating sovereign catastrophe risk pools that allow governments to coordinate with one another to insure their uncertain fiscal liabilities at lower cost. Countries contribute to the pool, which then provides payments if an insured natural disaster strikes. The African Risk Capacity (ARC), has been proposed as a pan-Africa drought risk pool to insure against drought risk in Africa south of the Sahara. If fully operationalized, the ARC will mark a major change in how donors fund emergency support to countries in Africa during times of need. In this paper, we undertake a cost-benefit analysis of the ARC pool and discuss how lessons can inform the design of the ARC.
... Thanks also to Olivier Mahul, Liam Wren-Lewis, Ruth Vargas Hill and participants at seminars ... more ... Thanks also to Olivier Mahul, Liam Wren-Lewis, Ruth Vargas Hill and participants at seminars at Oxford University. Any remaining errors are my own. ESRC funding is gratefully acknowledged. 1 Page 2. However, weather derivatives have proved challenging to sell. ...
Economics Series Working Papers, 2011
... Thanks also to Rocco Macchiavello, Ian Jewitt, Francis Teal, John Thanassoulis, LiamWren-Lewi... more ... Thanks also to Rocco Macchiavello, Ian Jewitt, Francis Teal, John Thanassoulis, LiamWren-Lewis, Joe Perkins and participants at seminars at Oxford University. Any remaining errors are my own. 1 Page 2. 1 Introduction Being poor in a poor country is risky. ...
This paper considers the potential role of government in aiding the scale-up of high quality inde... more This paper considers the potential role of government in aiding the scale-up of high quality index insurance products in developing countries. In particular, we analyse optimal public policy in light of the fact that index insurance policies are typically credence goods -that is, the basis risk of a given policy cannot be distinguished by consumers before purchase and only to a limited extent after purchase. We discuss two potential market failures that stem from this property that governments may seek to correct: low takeup and low investment in reducing basis risk. In each case, we consider the costs and benefits of various alternative government policies. We show that policies aimed to improve take-up may improve or worsen incentives for investment, and that the precise nature of these effects will depend on the government's ability to commit, the marginal cost of funds, and their potential to identify the inputs necessary for constructing a high quality index.
Environmental Science Policy, Mar 1, 2013
Disaster risk financing Natural disasters a b s t r a c t Providing disaster microinsurance to lo... more Disaster risk financing Natural disasters a b s t r a c t Providing disaster microinsurance to low income individuals is far from easy. Designing and structuring products so that they can be sold at low cost raises a set of challenges, and even then the level of voluntary purchase can be disappointingly low. Recent innovations in providing agricultural insurance could have broad implications for other disaster microinsurance products. If a market is to be viable governments will have key roles to play, including: approving insurance policy small print and product designs; supporting or leading industry-wide investments in data collection, index design, and loss adjustment capacity; financing sustained public information campaigns; nudging or compelling purchase; and committing to limits on post-disaster financial assistance to the uninsured. If disaster microinsurance prices do not accurately reflect the risks faced, the presence of disaster microinsurance can distort incentives to migrate. However, in the presence of riskbased pricing, it seems plausible that disaster microinsurance could make it easier for people to stay where they are even as their environment becomes more fragile, yet increase post-disaster migration through increasing post-disaster wealth.
SSRN Electronic Journal, 2000
This paper considers the potential role of government in aiding the scale-up of high quality inde... more This paper considers the potential role of government in aiding the scale-up of high quality index insurance products in developing countries. In particular, we analyse optimal public policy in light of the fact that index insurance policies are typically credence goods -that is, the basis risk of a given policy cannot be distinguished by consumers before purchase and only to a limited extent after purchase. We discuss two potential market failures that stem from this property that governments may seek to correct: low takeup and low investment in reducing basis risk. In each case, we consider the costs and benefits of various alternative government policies. We show that policies aimed to improve take-up may improve or worsen incentives for investment, and that the precise nature of these effects will depend on the government's ability to commit, the marginal cost of funds, and their potential to identify the inputs necessary for constructing a high quality index.
Applied Economic Perspectives and Policy, 2014
Annals of Actuarial Science, 2014
Policy Research Working Papers, 2012
Policy Research Working Papers, 2012
Policy Research Working Papers, 2012
In recent years, typhoons have struck the Philippines and Vanuatu; earthquakes have rocked Haiti,... more In recent years, typhoons have struck the Philippines and Vanuatu; earthquakes have rocked Haiti, Pakistan, and Nepal; floods have swept through Pakistan and Mozambique; droughts have hit Ethiopia, Kenya, and Somalia; and more. All led to loss of life and loss of livelihoods, and recovery will take years. One of the likely effects of climate change is to increase the likelihood of the type of extreme weather events that seems to cause these disasters. But do extreme events have to turn into disasters with huge loss of life and suffering?
Dull Disasters? harnesses lessons from finance, political science, economics, psychology, and the natural sciences to show how countries and their partners can be far better prepared to deal with disasters. The insights can lead to practical ways in which governments, civil society, private firms, and international organizations can work together to reduce the risks to people and economies when a disaster looms. Responses to disasters then become less emotional, less political, less headline-grabbing, and more business as usual and effective.
The book takes the reader through a range of solutions that have been implemented around the world to respond to disasters. It gives an overview of the evidence on what works and what doesn't and it examines the crucial issue of disaster risk financing. Building on the latest evidence, it presents a set of lessons and principles to guide future thinking, research, and practice in this area.