New-concept flood insurance could help Bangladesh's poor

IRIN: A new insurance scheme in which pre-determined flood thresholds trigger speedy compensation offers hope for poor people in flood-prone Bangladesh, experts say. “Floods adversely impact the ability of the poor to earn a livelihood both by destroying assets and limiting opportunities for labour,” said Snehal Soneji, Oxfam International’s Bangladesh country director.

“This [insurance] product is index-based and operates at the meso-level, which means that payout is triggered on the basis of a certain threshold being reached resulting in immediate payout without the long process of surveying and then payout,” he explained, referring to traditional insurance schemes that rely on time-consuming damage assessment surveys to determine compensation.

According to a 2012 article in the journal Applied Economic Perspectives and Policy, “index insurance indemnifies the insured based on the observed value of a specified `index’ or some other closely related variable… [and] the most widely used index in index insurance contract designs is rainfall.”

A 2013 scoping report by the Malaysia-based research organization World Fish and a consortium of environment and agricultural agencies argued: “With current and anticipated increases in magnitude of extreme weather events and a declining consistency in weather patterns…there has been a growing interest in weather index-based insurance schemes in Bangladesh.”

Norul Amin, economic and private sector coordinator at Oxfam-Bangladesh, told IRIN: “There is strong demand for financial disaster recovery mechanisms, not only among the poor communities, but also insurance sector, donor agencies, micro-finance institutes and government officials.”...

In 2007, an aerial view over southern Bangladesh reveals extensive flooding as a result of Cyclone Sidr. US Marine Corps photo by Staff Sgt. Julius Hawkins (RELEASED)