Index insurance for pro-poor conservation of hornbills in Thailand

Abstract

This study explores the potential of index insurance as a mechanism to finance community-based biodiversity conservation in areas where a strong correlation exists between natural disaster risk, keystone species populations, and the well-being of the local population. We illustrate this potential using the case of hornbill conservation in the Budo-Sungai Padi rainforests of southern Thailand, using 16-y hornbill reproduction data and 5-y household expenditures data reflecting local economic well-being. We show that severe windstorms cause both lower household expenditures and critical nest tree losses that directly constrain nesting capacity and so reduce the number of hornbill chicks recruited in the following breeding season. Forest residents' coping strategies further disturb hornbills and their forest habitats, compounding windstorms' adverse effects on hornbills' recruitment in the following year. The strong statistical relationship between wind speed and both hornbill nest tree losses and household expenditures opens up an opportunity to design wind-based index insurance contracts that could both enhance hornbill conservation and support disaster-affected households in the region. We demonstrate how such contracts could be written and operationalized and then use simulations to show the significant promise of unique insurance-based approaches to address weather-related risk that threatens both biodiversity and poor populations.weather risk management | poverty | safety net | sustainable conservation W eather risk is unavoidable. Storms, droughts, floods, and other extreme events happen and cause considerable damage. In high-income countries, insurance and related risktransfer instruments offer at least partial protection from catastrophic losses by providing indemnity payments to finance rapid recovery. However, conventional insurance is typically unavailable in the more remote rural regions of the low-income world, where the poorest people live and the highest rates of species endemism and biodiversity are found. The high transactions costs of verifying losses and problems of moral hazard and adverse selection that arise from imperfect information concerning individuals' loss experience conspire to preempt the emergence of conventional insurance for these regions.New initiatives in index insurance show considerable promise for filling missing risk markets in low-income countries (1). These financial instruments make indemnity payments on the basis of an index that is precise, objectively verifiable, available at low cost in near-real time, not manipulable by either party to the contract, and strongly correlated with the covariate risk being insured. Common indexes include rainfall or temperature available from meteorological stations, area average crop yields estimated from farm surveys, and crop growth models. Because it overcomes the transaction cost and information problems that bedevil conventional insurance, index insurance is especially well suited to manage weather risk and natural disasters that t...

Simple Incentives and Group Dependence for Successful Payments for Ecosystem Services Programs: Evidence from an Experimental Game in Rural Lao PDR

“…Technical assistance, insurance against crop failure, contributions to communal services, and access to credit are other possibilities (Engel et al . ; Wong ; Chantarat ; Yang et al . ; To et al .…”

“…Direct cash payments (either to a group or individual) are perhaps the simplest option (Alston et al 2013;Loft et al 2014). Technical assistance, insurance against crop failure, contributions to communal services, and access to credit are other possibilities (Engel et al 2008;Wong 2014;Chantarat 2011;Yang et al 2015;To et al 2012). Some programs combine two or more of these options.…”

On biodiversity conservation and poverty traps

“…In an area in which both people and threatened hornbill populations share a vulnerability to severe weather events, Chantarat et al (33) describe a unique index insurance mechanism they designed to provide both socioeconomic and wildlife conservation benefits. One problem that has historically plagued both conservation and international aid agencies is that they must often behave reactively to stochastic shocks.…”

“…In too many cases, this lag in response is long enough for systems to descend into new and less favorable equilibria. Chantarat et al (33) draw on years of meteorological, social, and hornbill life history data to design an index insurance mechanism that should provide a quick and reliable response in the event of cyclones. Should routine meteorological data reach a key trigger point (in this case, high wind speeds that cause loss of older trees with appropriate nesting cavities as well as loss of local farm income), the insurance will disburse payments to conservation managers who use these funds to employ villagers to construct, install, and monitor artificial nest boxes that replace storm-damaged nesting trees, a limiting ecosystem feature that might tip the endangered hornbill populations below a threshold of sustainability.…”

Modelado de riesgos para el sistema vaca-cría del estado de Chihuahua utilizando indicadores socioeconómicos y ambientales

“…En este sentido, diversos estudios (32,33,34) demuestran que el aumento en el riesgo sobre los patrones de recuperación de pastizales es influenciado por factores como cambios en uso del suelo, tecnificación y capacitación de productores (34) ; así mismo, los cambios climáticos extremos (sequía y temperaturas extremas) afectan la productividad de los pastos (35,36) , que directamente impactan la productividad ganadera en las ecorregiones.…”