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Statistical Analysis of Rainfall Insurance Payouts in Southern India

20 Pages Posted: 20 Apr 2016  

Xavier Giné

World Bank - Development Research Group (DECRG)

Robert M. Townsend

MIT - Department of Economics

James I. Vickery

Federal Reserve Bank of New York

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Date Written: December 1, 2007

Abstract

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.

Keywords: Debt Markets, Deposit Insurance, Labor Policies, Emerging Markets

Suggested Citation

Giné, Xavier and Townsend, Robert M. and Vickery, James I., Statistical Analysis of Rainfall Insurance Payouts in Southern India (December 1, 2007). World Bank Policy Research Working Paper No. 4426. Available at SSRN: https://ssrn.com/abstract=1062408

Xavier Gine

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
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Washington, DC 20433
United States

HOME PAGE: https://sites.google.com/site/decrgxaviergine/

Robert M. Townsend

MIT - Department of Economics ( email )

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Cambridge, MA 02142
United States
617-452-3722 (Phone)
617-253-1330 (Fax)

James Ian Vickery (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

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