IDEAS home Printed from https://ideas.repec.org/a/spr/climat/v134y2016i1p15-28.html
   My bibliography  Save this article

Analysis of the future potential of index insurance in the West African Sahel using CMIP5 GCM results

Author

Listed:
  • Asher Siebert

Abstract

Weather based index insurance is considered to be a potentially promising means of financial adaption to the challenges of climate change and variability; particularly for the agricultural sector in the developing world. However, comparatively little attention has been devoted to the analysis of the long-term viability of this adaptation mechanism in light of the interaction between changes in climate and the frequency of extreme events. Such changes in the frequency of extreme events are expected to have significant implications for the viability and pricing of index insurance over time. This question is analyzed in the context of hypothetical drought and flood index insurance contracts proposed for the West African Sahel using data from five Global Climate Models (GCMs) that were part of the Intergovernmental Panel on Climate Change’s (IPCC) 5th Coupled Model Inter-comparison Project (CMIP5). GCM derived trends in the mean and variance of the regional precipitation are integrated into a Monte Carlo simulation of the frequency of extreme seasonal drought and rainfall. Expected payout risk and the probability of 10 or more payouts in a 30-year window are modeled. The model results presented show significant pricing sensitivity to climate model parameters; particularly changes in the mean precipitation and strong multi-decadal variability. Further, within the Sahel region, there is a significant spatial heterogeneity between sub-regions. These findings imply that the utility and affordability of such index insurance contracts over time will be complex and heterogeneous over time and space. Copyright Springer Science+Business Media Dordrecht 2016

Suggested Citation

  • Asher Siebert, 2016. "Analysis of the future potential of index insurance in the West African Sahel using CMIP5 GCM results," Climatic Change, Springer, vol. 134(1), pages 15-28, January.
    • Handle: RePEc:spr:climat:v:134:y:2016:i:1:p:15-28
    DOI: 10.1007/s10584-015-1508-x
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10584-015-1508-x
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10584-015-1508-x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. W. Neil Adger & Saleemul Huq & Katrina Brown & Declan Conway & Mike Hulme, 2003. "Adaptation to climate change in the developing world," Progress in Development Studies, , vol. 3(3), pages 179-195, July.
    2. Robert Kates, 2000. "Cautionary Tales: Adaptation and the Global Poor," Climatic Change, Springer, vol. 45(1), pages 5-17, April.
    3. Benjamin Collier & Jerry Skees & Barry Barnett, 2009. "Weather Index Insurance and Climate Change: Opportunities and Challenges in Lower Income Countries," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 34(3), pages 401-424, July.
    4. Michael Norton & Daniel Osgood & Malgosia Madajewicz & Eric Holthaus & Nicole Peterson & Rahel Diro & Conner Mullally & Tse-Ling Teh & Mengesha Gebremichael, 2014. "Evidence of Demand for Index Insurance: Experimental Games and Commercial Transactions in Ethiopia," Journal of Development Studies, Taylor & Francis Journals, vol. 50(5), pages 630-648, May.
    5. Siti Nuryanah & Sardar M. N. Islam, 2015. "The Context of the Case Study," Palgrave Macmillan Books, in: Corporate Governance and Financial Management, chapter 5, pages 145-156, Palgrave Macmillan.
    6. Sommarat Chantarat & Andrew G. Mude & Christopher B. Barrett & Michael R. Carter, 2013. "Designing Index-Based Livestock Insurance for Managing Asset Risk in Northern Kenya," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 80(1), pages 205-237, March.
    7. Susan L. Cutter & Bryan J. Boruff & W. Lynn Shirley, 2003. "Social Vulnerability to Environmental Hazards," Social Science Quarterly, Southwestern Social Science Association, vol. 84(2), pages 242-261, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Geneva List & Oliver T. Coomes, 2017. "Natural hazards and risk in rice cultivation along the upper Amazon River," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 87(1), pages 165-184, May.
    2. Mohor, Guilherme Samprogna & Mendiondo, Eduardo Mario, 2017. "Economic indicators of hydrologic drought insurance under water demand and climate change scenarios in a Brazilian context," Ecological Economics, Elsevier, vol. 140(C), pages 66-78.
    3. Selene Perazzini, 2020. "Public-Private Partnership in the Management of Natural Disasters: A Review," Papers 2006.05845, arXiv.org.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Asher Siebert, 2016. "Analysis of the future potential of index insurance in the West African Sahel using CMIP5 GCM results," Climatic Change, Springer, vol. 134(1), pages 15-28, January.
    2. Yongdeng Lei & Jing’ai Wang & Yaojie Yue & Hongjian Zhou & Weixia Yin, 2014. "Rethinking the relationships of vulnerability, resilience, and adaptation from a disaster risk perspective," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 70(1), pages 609-627, January.
    3. Leigh Johnson, 2013. "Index Insurance and the Articulation of Risk-Bearing Subjects," Environment and Planning A, , vol. 45(11), pages 2663-2681, November.
    4. Piya, Luni & Maharjan, Keshav Lall & Joshi, Niraj Prakash, 2012. "Vulnerability of rural households to climate change and extremes: Analysis of Chepang households in the Mid-Hills of Nepal," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126191, International Association of Agricultural Economists.
    5. Forsyth, Tim & Evans, Natalie, 2013. "What is autonomous adaption? Resource scarcity and smallholder agency in Thailand," LSE Research Online Documents on Economics 45412, London School of Economics and Political Science, LSE Library.
    6. Forsyth, Tim & Evans, Natalie, 2013. "What is Autonomous Adaption? Resource Scarcity and Smallholder Agency in Thailand," World Development, Elsevier, vol. 43(C), pages 56-66.
    7. Xiao Lin & W. Jean Kwon, 2020. "Application of parametric insurance in principle‐compliant and innovative ways," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 23(2), pages 121-150, June.
    8. S. Prabhakar & Ancha Srinivasan & Rajib Shaw, 2009. "Climate change and local level disaster risk reduction planning: need, opportunities and challenges," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 14(1), pages 7-33, January.
    9. Jardine, Sunny L. & Fisher, Mary C. & Moore, Stephanie K. & Samhouri, Jameal F., 2020. "Inequality in the Economic Impacts from Climate Shocks in Fisheries: The Case of Harmful Algal Blooms," Ecological Economics, Elsevier, vol. 176(C).
    10. Ashish Sharma & Subir Sen, 2022. "Droughts risk management strategies and determinants of preparedness: insights from Madhya Pradesh, India," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 114(2), pages 2243-2281, November.
    11. Ashley C. Freeman & Walker S. Ashley, 2017. "Changes in the US hurricane disaster landscape: the relationship between risk and exposure," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 88(2), pages 659-682, September.
    12. Scoville-Simonds, Morgan & Jamali, Hameed & Hufty, Marc, 2020. "The Hazards of Mainstreaming: Climate change adaptation politics in three dimensions," World Development, Elsevier, vol. 125(C).
    13. Anjum Tasnuva & Md. Riad Hossain & Roquia Salam & Abu Reza Md. Towfiqul Islam & Muhammad Mainuddin Patwary & Sobhy M. Ibrahim, 2021. "Employing social vulnerability index to assess household social vulnerability of natural hazards: an evidence from southwest coastal Bangladesh," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(7), pages 10223-10245, July.
    14. Tian, Qing & Lemos, Maria Carmen, 2018. "Household Livelihood Differentiation and Vulnerability to Climate Hazards in Rural China," World Development, Elsevier, vol. 108(C), pages 321-331.
    15. Rigo, Roberta & Santos, Paulo & Frontuto, Vito, 2022. "Landscape heterogeneity, basis risk and the feasibility of index insurance: An analysis of rice in upland regions of Southeast Asia," Food Policy, Elsevier, vol. 108(C).
    16. Solomon Asfaw & Giuseppe Maggio & Alessandro Palma, 2018. "Climate Resilience Pathways of Rural Households. Evidence from Ethiopia," SPRU Working Paper Series 2018-18, SPRU - Science Policy Research Unit, University of Sussex Business School.
    17. Mark Budolfson & Francis Dennig & Marc Fleurbaey & Asher Siebert & Robert H. Socolow, 2017. "The comparative importance for optimal climate policy of discounting, inequalities and catastrophes," Climatic Change, Springer, vol. 145(3), pages 481-494, December.
    18. Wienand Kölle & Andrea Martínez Salgueiro & Matthias Buchholz & Oliver Musshoff, 2021. "Can satellite‐based weather index insurance improve the hedging of yield risk of perennial non‐irrigated olive trees in Spain?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 65(1), pages 66-93, January.
    19. Wenhua Qi & Guiwu Su & Lei Sun & Fan Yang & Yang Wu, 2017. "“Internet+” approach to mapping exposure and seismic vulnerability of buildings in a context of rapid socioeconomic growth: a case study in Tangshan, China," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 86(1), pages 107-139, March.
    20. Yi Peng, 2015. "Regional earthquake vulnerability assessment using a combination of MCDM methods," Annals of Operations Research, Springer, vol. 234(1), pages 95-110, November.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:climat:v:134:y:2016:i:1:p:15-28. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.