The rising impact of natural diasters is driving up the cost of disaster relief and reconstruction for the public sector, especially in developing countries where insurance penetration is still low. Swiss Re’s focus report “Disaster risk financing: reducing the burden on public budgets” shows how recent risk transfer solutions offer governments, development banks and relief organisations models to access pre-event financing, and enable them to allocate relief funds more efficiently by using insurance and capital market instruments.
Innovations in risk transfer for natural disasters in lower-income countries, in particular weather index insurance products, can be used to shift various weather-related risks. This article discusses the linkage between weather risk and poverty; provides background information on weather index insurance products; describes requirements for the implementation of weather index insurance and possible roles for governments, donors, and international financial institutions in facilitating implementation; and briefly reviews recent efforts to provide weather index insurance products in rural areas of some middle- and lower-income countries.
This study provides an in-depth review of microinsurance by analysing a range of case studies and examining the benefits and limitations of microinsurance. It provides clear evidence of the value and potential of microinsurance in transferring risk and protecting low-income households and businesses against disaster losses. Microinsurance can provide access to post-disaster finance, protecting assets and livelihoods as well as providing funds for reconstruction. Because insured households are more creditworthy, insurance can also promote investments in productive assets.
Coping with the consequences of drought is costly for livestock producers. This article focuses on beef cattle and other livestock that use pasture are the main source of feed. Options will vary from farm-to-farm but in each case one of these options is likely to be less expensive that the others. Options include buying various types of forages and feed, reducing animal numbers, or some combination.
Managing risk is therefore important not only for smoothing out the well-being of these farmers over the good and the bad years, but also for enabling their escape from extreme poverty. If the risks facing poor farm households can be reduced, their creditworthiness can be increased. And increased creditworthiness permits them to invest in higher-yield activities, including higher value-added farming. For these reasons and others, including a probable rise in the volatility of climate shocks accompanying human-induced climate change, financial risk management is likely to come to the forefront of strategies for poverty reduction.
In the wake of skyrocketing insurance claims due to natural disasters—hurricanes, wildfires, droughts, blizzards and the like—insurers have been imposing steep rate hikes and, in some cases, fleeing high-risk areas, leaving consumers out in the cold. It's gotten so out of hand, consumer advocates say, that insurers now are even crying climate change as a factor in raising premiums or dumping clients.
The purpose of this publication is to meet the demand for a brief, accessible introduction to the role of insurance as a risk management mechanism in livestock and aquaculture enterprises. With the focus of the publication being on enterprises in developing countries, most attention is given to livestock (especially cattle, sheep, goats, poultry) kept for food and/or fibre, and transport/motive power, rather than bloodstock used for sporting and recreational purposes.
Experience to date indicates that it is extremely difficult, without massive government subsidies, to insure farm level crop yields from losses caused by any number of natural perils. Those who seek effective, agricultural risk management tools, offered with little or no government subsidy, need to understand the underlying problems with farm level, multiple peril crop insurance. This chapter begins by discussing those problems. The following section presents an alternative form of insurance that makes payments based not on measures of individual farm yields, but rather on either area yields or some weather event like temperature or rainfall.
Linking the use of risk-shifting innovations that are being tried around the world directly to rural finance has been largely missing. This paper builds a set of recommendations for using index insurance and, in some cases, futures markets in combination with rural finance. The intent is for the MFE to have the opportunity to purchase index insurance and put options to protect against the correlated risk of crop disaster, livestock deaths due to natural disasters, and commodity price declines. The indemnity payments can be used by the small local banking interest.
Highly pathogenic avian influenza (HPAI) under current conditions poses a major risk to human and animal health. Efforts to contain the disease are therefore in national and global interest. As the most widely practiced control methods for poultry involve culling birds that are infected or in regions immediately around infected animals, the most common practice to ensure the cooperation of owners of birds is to compensate them for the culling of their animals to achieve this public goal.
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