Risk Modeling for Appraising Named Peril Index Insurance Products: A Guide for Practitioners

Index insurance is commonly perceived to be complicated and difficult to evaluate. This is one reason index insurance products have not yet achieved high penetration in developing countries, despite their clear potential to improve the risk management options for vulnerable populations.

This guide attempts to close the knowledge gap to grow this important market and provide protection to more low-income customers. A central goal of this guide is to promote clear communication of the features of products developed to facilitate informed decision making by new and existing buyers of index-based insurance products, insurers, reinsurers, regulators charged with approving new products, and other affected stakeholders.

As such, it supports actuaries and other professionals involved in designing and pricing index-based insurance products in following the principles outlined in the Actuaries’ Code of the Institute and Faculty of Actuaries, United Kingdom.

This book is arranged as follows: (i) Part one of this guide provides a summary of the insights and decisions required for the insurer to make an informed decision to launch and expand an index insurance business line; and (ii) Part two of this guide provides a step-by-step guide to calculating the decision metrics used by the insurance manager in part 1.