The Better Trigger: Insuring Against Disaster Risk

@article{Teh2014TheBT,
  title={The Better Trigger: Insuring Against Disaster Risk},
  author={Tse-Ling Teh and C. Woolnough},
  journal={Political Economy - Development: Environment eJournal},
  year={2014}
}
Index triggers have enabled the extension of insurance to disaster risks by providing a simple mechanism to determine insurance payment. Disaster risks are notoriously difficult to insure against due to the covariant nature of risks, moral hazard and adverse selection. Index based risk transfer minimizes these obstacles by not fully insuring the risk. However, such incompleteness generates basis risk, that is the risk that claims do not match losses. This paper analyzes the upside basis risk… Expand

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