Towards De-risking Disasters

This report maps the potential for scaling up index-based disaster insurance for South and South East Asian countries. It concentrates on the experiences of the index-based crop and/or disaster insurance products in five Asian countries: India, Pakistan, Indonesia, Sri Lanka, and the Philippines.The report states that disaster insurance is a financial tool to manage the disaster shocks. Index-based disaster insurance products are a new approach in disaster insurance. It reduces the transaction cost and justifies entry of insurers to develop disaster coverage, even for low-income people. Findings from the experiments in the countries of study include:

• Government support helps reach scale of index-based insurance;
• Private insurers enter the index insurance market and disaster insurance market only if they are sure of a substantial market size;
• Role of international donors becomes very pronounced when index insurance is offered for the first time;
• Like traditional insurance, index insurances are still costly for clients;
• Multiple distribution channels need to be employed to attain high outreach.