Aditya Kusuma - Academia.edu (original) (raw)
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Mehran University of Engineering and Technology
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Papers by Aditya Kusuma
Natural disasters have adverse consequences. A combination of effective mitigation strategies and... more Natural disasters have adverse consequences. A combination of effective mitigation strategies and appropriate coping measures—decreasing both exposure and vulnerability—can reduce their detrimental impact. Further policies can reduce the consequent losses to the economy in the aftermath of catastrophic events. Although constituting no panacea, the evidence suggests that insurance enables improved recovery and increases resilience. Yet, insuring catastrophic risks is complex and not easily achieved. Different types of disaster insurance products are found globally, but to narrow our discussion, we focus on two types of insurance for catastrophic hazards: earthquake insurance and agricultural insurance (for floods and droughts). We survey strategies implemented by governments, the private sector and multilateral/regional organizations that aim to address several impediments to insurance adoption and also describe the available evidence about the performance of such insurance syste...
Advances in Spatial Science, 2019
This chapter describes the state of our knowledge about the impacts of disaster insurance. To nar... more This chapter describes the state of our knowledge about the impacts of disaster insurance. To narrow our discussion, we concentrate on agricultural insurance (for droughts and floods) and earthquake insurance (for buildings and infrastructure) and describe the current state of these two markets globally. We then briefly discuss the more commonly investigated puzzles about the demand and supply of insurance in these domains. Potential purchasers of insurance (households, commercial firms, infrastructure owners, local and central governments) appear to undervalue catastrophic insurance and thus the demand for insurance is typically below what standard economic models with risk averse agents would predict. Equally, the supply of insurance contracts also appears to be limited in both of these markets. Both of these puzzles have been surveyed before. Our main focus is to describe the more sparse literature about the impacts of having these insurance covers. We ask how the presence of ins...
The Geneva Risk and Insurance Review, 2018
The potentially adverse effects of droughts on agricultural output are obvious. Indonesian rice f... more The potentially adverse effects of droughts on agricultural output are obvious. Indonesian rice farmers have no financial protection from climate risk via catastrophic weather risk transfer tools. Done well, a weather index insurance (WII) program can not only provide resources that enable recovery, but can also facilitate the adoption of prevention and adaptation measures and incentivise risk reduction. Here, we quantify the applicability, viability, and likely cost of introducing a WII for droughts for rice production in Indonesia. To reduce basis risk, we construct district specific indices that are based on the estimation of Panel Geographically Weighted Regressions models. With these spatial tools, and detailed district level data on past agricultural productivity and weather conditions, we present an algorithm that generates an effective and actuarially sound WII, and measure its effectiveness in reducing income volatility for farmers. We use data on annual paddy production in 428 Indonesian districts, reported over the period 1990-2013, and climate data from 1950-2015. We use the monthly Palmer Drought Severity Index and identify district-specific trigger and exit points for the insurance plan. We quantify the impact of this hypothetical insurance product using past production data to calculate an actuarially-robust and welfare-enhancing price for this scheme. JEL-Codes: Q540.
Natural disasters have adverse consequences. A combination of effective mitigation strategies and... more Natural disasters have adverse consequences. A combination of effective mitigation strategies and appropriate coping measures—decreasing both exposure and vulnerability—can reduce their detrimental impact. Further policies can reduce the consequent losses to the economy in the aftermath of catastrophic events. Although constituting no panacea, the evidence suggests that insurance enables improved recovery and increases resilience. Yet, insuring catastrophic risks is complex and not easily achieved. Different types of disaster insurance products are found globally, but to narrow our discussion, we focus on two types of insurance for catastrophic hazards: earthquake insurance and agricultural insurance (for floods and droughts). We survey strategies implemented by governments, the private sector and multilateral/regional organizations that aim to address several impediments to insurance adoption and also describe the available evidence about the performance of such insurance syste...
Advances in Spatial Science, 2019
This chapter describes the state of our knowledge about the impacts of disaster insurance. To nar... more This chapter describes the state of our knowledge about the impacts of disaster insurance. To narrow our discussion, we concentrate on agricultural insurance (for droughts and floods) and earthquake insurance (for buildings and infrastructure) and describe the current state of these two markets globally. We then briefly discuss the more commonly investigated puzzles about the demand and supply of insurance in these domains. Potential purchasers of insurance (households, commercial firms, infrastructure owners, local and central governments) appear to undervalue catastrophic insurance and thus the demand for insurance is typically below what standard economic models with risk averse agents would predict. Equally, the supply of insurance contracts also appears to be limited in both of these markets. Both of these puzzles have been surveyed before. Our main focus is to describe the more sparse literature about the impacts of having these insurance covers. We ask how the presence of ins...
The Geneva Risk and Insurance Review, 2018
The potentially adverse effects of droughts on agricultural output are obvious. Indonesian rice f... more The potentially adverse effects of droughts on agricultural output are obvious. Indonesian rice farmers have no financial protection from climate risk via catastrophic weather risk transfer tools. Done well, a weather index insurance (WII) program can not only provide resources that enable recovery, but can also facilitate the adoption of prevention and adaptation measures and incentivise risk reduction. Here, we quantify the applicability, viability, and likely cost of introducing a WII for droughts for rice production in Indonesia. To reduce basis risk, we construct district specific indices that are based on the estimation of Panel Geographically Weighted Regressions models. With these spatial tools, and detailed district level data on past agricultural productivity and weather conditions, we present an algorithm that generates an effective and actuarially sound WII, and measure its effectiveness in reducing income volatility for farmers. We use data on annual paddy production in 428 Indonesian districts, reported over the period 1990-2013, and climate data from 1950-2015. We use the monthly Palmer Drought Severity Index and identify district-specific trigger and exit points for the insurance plan. We quantify the impact of this hypothetical insurance product using past production data to calculate an actuarially-robust and welfare-enhancing price for this scheme. JEL-Codes: Q540.