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Statistical analysis of rainfall insurance payouts in southern India, Volume 1
 
Author:Gine, Xavier; Townsend, Robert; Vickery, James; Country:India;
Date Stored:2007/12/04Document Date:2007/12/01
Document Type:Policy Research Working PaperSubTopics:Emerging Markets; Debt Markets; ; Deposit Insurance; Labor Policies
Language:EnglishRegion:South Asia
Report Number:WPS4426Collection Title:Policy Research working paper ; no. WPS 4426
Volume No:1  

Summary: Using 40 years of historical rainfall data, this paper estimates a distribution for payouts on rainfall insurance policies offered to farmers in the State of Andhra Pradesh, India, in 2006. The authors find that the contracts primarily protect households against extreme tail events; half the expected value of indemnities paid by the insurance are generated by only 2 percent of rainfall realizations. Contract payouts are significantly correlated cross-sectionally, and also inversely associated with real GDP growth. The paper discusses the implications of these findings for the potential benefits of insurance to households, the risks facing a financial institution underwriting rainfall insurance contracts, and pricing.

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