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Demand for index-based flood insurance in Jakarta, Indonesia

Crawford School of Public Policy | Arndt-Corden Department of Economics

Event details

PhD Seminar (Econ)

Date & time

Friday 13 November 2020
11.00am–12.00pm

Venue

Online via Zoom

Speaker

Jose Cobian

Contacts

Ryan Edwards

Developing country megacities are constantly exposed to flood risk, with a clear gap regarding insurance protection, and poor risk management by urban populations. This article analyses demand for hypothetical index-based flood insurance in Jakarta, Indonesia. A standard expected utility theory framework tests household’s reaction to distance (proxy for basis risk), its level of effect to reduce demand, and insurance uptake effects from price discounts, flood prevention, and risk aversion. As predicted, demand falls with price and basis risk, and households with better flood responses help increase demand. We recommend further investment in floodgate stations, expanded warning systems, and educational campaigns.

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