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

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 selectio