Sonia Akter

Exploring the feasibility of private micro flood insurance provision in Bangladesh

This paper aims to contribute to the debate on the feasibility of the provision of micro flood insurance as an effective tool for spreading disaster risks in developing countries and examines the role of the institutional-organisational framework in assisting the design and implementation of such a micro flood insurance market. In Bangladesh, a private insurance market for property damage and livelihood risk due to natural disasters does not exist. Private insurance companies are reluctant to embark on an evidently unprofitable venture. Testing two different institutional-organisational models, this research reveals that the administration costs of micro-insurance play an important part in determining the long-term viability of micro flood insurance schemes. A government-facilitated process to overcome the differences observed in this study between the nonprofit micro-credit providers and profit-oriented private insurance companies is needed, building on the particular competence each party brings to the development of a viable micro flood insurance market through a public-private partnership.

The Role of Microinsurance as a Safety Net Against Environmental Risks in Bangladesh

The Intergovernmental Panel on Climate Change (IPCC) identifies Bangladesh as one of the countries that will be hardest hit by the anticipated effects of climate change. The poorest people are the most vulnerable, as they do not have sufficient means to cope with environmental risks. In the absence of effective safety nets, poor people become trapped in chronic poverty due to the recurrent damage caused by natural disasters. Recently, there has been growing optimism among policy makers and practitioners about the role of microinsurance as a safety net against weather risks for the poorest and most vulnerable people of Bangladesh. This article sheds light on this issue by synthesizing the findings of half a decade of research on the prospects of weather microinsurance in Bangladesh. Three key conclusions are drawn from the synthesis. First, the market for a standard, stand-alone weather microinsurance in Bangladesh is characterized by low demand, poor governance, and lack of prospects for commercial viability. Second, although the index-based flood insurance model has theoretical appeal (i.e., no moral hazard or adverse selection and low transaction cost), high economic cost might be associated with its highly complex practical implementation. Finally, the current (un)regulatory arrangement of microinsurance supply in Bangladesh, which does not guarantee accountability and protect clients’ rights, is likely to increase rather than decrease poor people’s vulnerability. The study makes two key recommendations: (1) exploring options for nontraditional insurance models (e.g., group-based and ex-post premium-based models), and (2) considering regulatory reforms to ensure good governance and to foster market efficiency through low-cost delivery and product innovation.

Preference uncertainty in stated preference studies: facts and artefacts

The ordinal scale and polychotomous choice methods are two widely used techniques for estimating preference uncertainty in stated preference studies. This article presents the results of two experiments that apply these estimation techniques. The first experiment was designed to compare and contrast the scores of the ordinal scale and polychotomous choice method. The second experiment was conducted to test a scale that combines verbal expressions with numerical and graphical interpretations: a composite scale. The results of the study can be summarized in three key findings. First, the polychotomous choice method generates a higher proportion of ‘yes’ responses than the conventional dichotomous choice elicitation format. Second, the composite scale generates a significantly higher proportion of certain responses. Finally, the ordinal scale performs poorly on the ground of construct validity.

Confronting Uncertainty and Missing Values in Environmental Value Transfer as Applied to Species Conservation

The nonuse (or passive) value of nature is important but time-consuming and costly to quantify with direct surveys. In the absence of estimates of these values, there will likely be less investment in conservation actions that generate substantial nonuse benefits, such as conservation of native species. To help overcome decisions about the allocation of conservation dollars that reflect the lack of estimates of nonuse values, these values can be estimated indirectly by environmental value transfer (EVT). EVT uses existing data or information from a study site such that the estimated monetary value of an environmental good is transferred to another location or policy site. A major challenge in the use of EVT is the uncertainty about the sign and size of the error (i.e., the percentage by which transferred value exceeds the actual value) that results from transferring direct estimates of nonuse values from a study to a policy site, the site where the value is transferred. An EVT is most useful if the decision-making framework does not require highly accurate information and when the conservation decision is constrained by time and financial resources. To account for uncertainty in the decision-making process, a decision heuristic that guides the decision process and illustrates the possible decision branches, can be followed. To account for the uncertainty associated with the transfer of values from one site to another, we developed a risk and simulation approach that uses Monte Carlo simulations to evaluate the net benefits of conservation investments and takes into account different possible distributions of transfer error. This method does not reduce transfer error, but it provides a way to account for the effect of transfer error in conservation decision making. Our risk and simulation approach and decision-based framework on when to use EVT offer better-informed decision making in conservation.

Valuing Climate Change Mitigation

Valuing Climate Change Mitigation discusses the role of uncertainty in valuing the benefits of climate change mitigation policies using contingent valuation and choice experiment techniques. It treats climate change using three dimensions of uncertainty: scenario, policy and preference. Conceptual frameworks are advanced to account simultaneously for these various dimensions of uncertainty. The authors then explore the impact of introducing these uncertainties into benefit estimates for the Australian Carbon Pollution Reduction Scheme.

The environmental and social impacts of flood defences in rural Bangladesh

Flood mitigation is clearly a very important issue for Bangladesh. It is highly related to other high priority policy goals such as food security. As a result, protection against flooding has often been combined with efforts to intensify agricultural production. Most of the flood control projects in Bangladesh are so-called ‘flood control, drainage, and irrigation’ projects. These projects have recovered thousands of hectares of land from the floodplain through the construction of dykes or embankments. However, this measure has come under criticism because: (1) it provides benefits in terms of increased agricultural productivity and is therefore biased towards landowners; (2) it has resulted in a long run decline in soil fertility due to the cessation of sediment deposition on land during flood; (3) it prohibits the migration and spawning of fish, and thereby reduces overall fish stocks and the livelihood of fishers; (4) flood control embankments also hinder water transportation because they prevent free water flows between rivers within and outside embankments. Consequently, flood control projects often reduce the incomes of water transportation workers and force some to leave this sector. Thus the construction of flood protection embankments has a complex pattern of positive and negative impacts for different sections and occupational groups within the affected population. Some of these impacts are through environmental channels. As mentioned above, fish stocks are negatively affected by the presence of embankments, which affects the livelihoods of those engaged in capture fisheries. This is a big problem because fisher communities in Bangladesh are generally one of the poorest occupation groups. Similarly, negatively affected people engaged in water transportation also tend to be from the poorest strata in the community.