Creating insurance markets for natural disaster risk in lower income countries: The potential role for securitization

Jerry R. Skees, Barry J. Barnett, Anne G. Murphy

Research output: Contribution to journalArticlepeer-review

16 Scopus citations


This article considers the potential for securitizing index‐based insurance products that transfer weather and natural disaster risks from lower income countries. It begins with a brief overview explaining why markets for natural disaster risks are important, yet often missing, in lower income countries and a review of some recent activities using index‐based weather insurance. Next, we describe how natural disaster risks are handled in higher income countries. These examples, along with the example of an innovative index‐based livestock insurance pilot project in Mongolia, illustrate how layers, or tranches, of natural disaster risk can be financed during the product development phase by creating structures similar to the Special Purpose Vehicles used in catastrophe bond, mortgage bond, and the emerging microfinance bond markets. We refer to these investment alternatives as micro‐CAT bonds since the principle amounts would be small relative to the existing CAT bond market.

Original languageEnglish
Pages (from-to)151-167
Number of pages17
JournalAgricultural Finance Review
Issue number1
StatePublished - May 5 2008

Bibliographical note

Publisher Copyright:
© Emerald Group Publishing Limited.


  • Catastrophe risk
  • Index insurance
  • Reinsurance
  • Socially responsible investing
  • Weather risks

ASJC Scopus subject areas

  • Agricultural and Biological Sciences (miscellaneous)
  • Economics, Econometrics and Finance (miscellaneous)


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