Weather indexes for developing countries

Publication´s abstract

The paper discusses the possible linkages between the emerging weather markets and public and private solutions to the problems created by weather-based natural disasters. While it deals with many of the conceptual issues surrounding weather risks, it also provides the conceptual base that is tied to how these risks can be segmented and layered. By segmenting and layering out weather risks, there are numerous opportunities for risk aggregators within a country to share risks globally. The paper examines three possible applications of weather insurance in developing countries: providing weather risk coverage to mutual insurance groups, directly to farmers and agri-businesses, and to governments to protect their exposure when they offer catastrophic insurance and provide disaster aid.

Conclusions:

The paper closes by focusing on the infrastructure needed for measuring weather and making a strong argument that a supporting infrastructure has vast social benefits. These social benefits can only be recognised once the numerous ways that weather indexes can be used to cope with and manage weather-based risks are understood. Private companies within developing countries, global markets that move the weather risks out of developing countries, governments of developing countries and the international donor community that is quick to respond when there are natural disasters in developing countries, can all play a role in using the same information and structure to address the problems brought on by extreme weather events.