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Improving humanitarian response to slow‐onset disasters using famine‐indexed weather derivatives

Agricultural Finance Review

ISSN: 0002-1466

Article publication date: 5 May 2008

Abstract

This paper illustrates how weather derivatives indexed to forecasts of famine can be designed and used by operational agencies and donors to facilitate timely and reliable financing, for effective emergency response to climate‐based, slow‐onset disasters such as drought. We provide a general framework for derivative contracts, especially in the context of index insurance and famine catastrophe bond, and show how they can be used to complement existing tools and facilities in drought risk financing through a risk‐layering strategy. We use the case of arid lands of northern Kenya, where rainfall proves a strong predictor of widespread and severe child wasting, to provide a simple empirical illustration of the potential contract designs.

Keywords

Citation

Chantarat, S., Turvey, C.G., Mude, A.G. and Barrett, C.B. (2008), "Improving humanitarian response to slow‐onset disasters using famine‐indexed weather derivatives", Agricultural Finance Review, Vol. 68 No. 1, pp. 169-195. https://doi.org/10.1108/00214660880001225

Publisher

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Emerald Group Publishing Limited

Copyright © 2008, Emerald Group Publishing Limited