Can Financial Markets be Tappedto Help Poor People Cope with Weather Risks?

Skees, Jerry ; Varangis, Panos ; Larson, Donald ; Siegel, Paul

World Bank, Washington, D.C.

关键词: ADVERSE SELECTION;    AGRICULTURAL INSURANCE;    AGRICULTURAL OUTPUT;    AGRICULTURAL PRODUCTION;    APPLICATIONS;   

DOI  :  10.1596/1813-9450-2812
RP-ID  :  WPS2812

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

Poor households in rural areas areparticularly vulnerable to risks that reduce incomes andincrease expenditures. Most past research has focused onrisk-coping strategies for the rural poor, specially onmicro-level and household actions. These are risks that canbeen shared within a community or extended family. Thesestrategies are effective for independent risks, butineffective for covariate or systemic risks. The authorsfocus on private and public mechanisms for managingcovariate risk for natural disasters. When many householdswithin the same community face risks that create losses forall, traditional coping mechanisms are likely to fail. Suchcovariate risks are not uncommon in many developingcountries, especially where farming remains a major sourceof income. The authors focus on risks related to weatherevents (such as excess rain, droughts, freezes, and highwinds) that have a severe impact on rural incomes. Weatherinsurance could cover the covariate risk for a community ofpoor households through formal and informal risk-sharingarrangements among households that are purchasing theseweather contracts. Given recent Mexican innovations targetedat helping the poor cope with catastrophe weather events,the authors use Mexico as a case study. In Mexico, poorhouseholds are exposed to systemic risks, such as droughtsand floods, that affect the economic livelihood of theirregion. Catastrophic insurance is useful for small farmers,although commercially oriented small farmers may wish toobtain coverage for less catastrophic events. Weatherinsurance could meet this need. It pays out according to thefrequency and intensity of specific weather events. Becauseweather insurance depends on the occurrences and objectivemeasure of intensity of a specific event, it does notrequire individual farm inspection that can be very costlyfor small farm. The authors argue that a key issue ofdelivering insurance to small farmers is the existence ofproducer organizations. In Mexico, the farmer mutualinsurance funds provide a good example. These funds provideinsurance to their members by pulling together resources topay for future indemnities and reinsures itself from majorsystemic risks that could hurt simultaneously all their members.