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Insurance against Climate Change : Financial Disaster Risk Management and Insurance Options for Climate Change Adaptation in BulgariaBulgaria is exposed to nearly all types of climate extremes, including floods, droughts, and others, as well as earthquakes. The combination of insurance products, early warning systems, information campaigns, infrastructure adaptation measures, and strict regulations can be very useful in tackling the negative climate change impacts. This note provides an overview of the insurance sector s contribution to climate change - related risk prevention and highlights some of Bulgaria s ongoing disaster risk management (DRM) efforts. The note aims to raise awareness and emphasize the role that financial disaster risk management (FDRM), including insurance, can have in climate change adaptation. Based on a desk review and preliminary in-country stakeholder consultations, the note s findings are meant to motivate new thinking and serve as an engagement tool for ongoing in-country discussions, as well to help identify analytical work to be carried out in the future. Based on the preliminary review of Bulgaria s specific context, several ideas are being put forward to be further explored in the ongoing discussions toward creating FDRM products to address the major natural disasters (in particular, floods, droughts, and earthquakes) and improving adaptation to climate change. Potential areas of analysis that can be further explored and, as such, plant a seed for future action can focus on promoting risk prevention and deploying insurance instruments, including issues around traditional risk management, technology innovation, compulsory disaster insurance, forecast insurance, and disaster insurance pools. The analysis which will assess the extent of vulnerability of the subjects covered by existing insurance products, can subsequently lead to the decisions on priority insurance products to be introduced in the future.
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Managing Agricultural Risk at the Country Level : The Case of Index-Based Livestock Insurance in MongoliaThis paper describes the index-based
 livestock insurance program in Mongolia designed in the
 context of a World Bank lending operation with Government of
 Mongolia and implemented on a pilot basis in 2005. This
 program involves a combination of self-insurance by herders,
 market-based insurance, and social insurance. Herders retain
 small losses, larger losses are transferred to the private
 insurance industry, and extreme or catastrophic losses are
 transferred to the government using a public safety net
 program. A syndicate pooling arrangement protects
 participating insurance companies against excessive insured
 losses, with excess of loss reinsurance provided by the
 government. The fiscal exposure of Government of Mongolia
 toward the most extreme losses is protected with a
 contingent credit facility. The insurance program relies on
 a mortality rate index by species in each local region. The
 index provides strong incentives to individual herders to
 continue to manage their herds so as to minimize the impacts
 of major livestock mortality events; individual herders
 receive an insurance payout based on the local mortality,
 irrespective of their individual losses. This project
 offered the first opportunity to design and implement an
 agriculture insurance program using a country-wide
 agricultural risk management approach. During the first
 sales season, 7 percent of the herders in the three pilot
 regions purchased the insurance product.
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Catastrophe Risk Financing in Developing Countries : Principles for Public InterventionPublic intervention in catastrophe insurance markets, supported by the donor community and the World Bank, should be country specific. Low-income countries, where the domestic non-life insurance market is undeveloped, should focus in the short term on the development of sovereign catastrophe insurance solutions and the promotion of public goods related to risk market infrastructure. These countries are usually not mature enough for the promotion of catastrophe insurance pools for private homeowners. Middle-income countries, where the domestic non-life insurance market is more developed, should help the private insurance industry offer market-based catastrophe insurance solutions to homeowners and to small and medium enterprises, including the agricultural sector. This book offers a framework, with lessons drawn from recent experience, guiding principles for public intervention and potential roles for donors and International Financial Institutions (IFIs). These lessons are expected to be used in developing affordable, effective and sustainable country-specific catastrophe insurance programs.