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Free keywords:
index-based insurance, risk management, water supply, hydroclimatic extremes, willingness to pay
Abstract:
Recent studies on hedging hydrological extremes on water utilities showed the potential benefits of index-based insurance. However, the interest and willingness of water utilities to adopt such insurance schemes remain unclear. This study investigates the interest of Brazilian water utilities in index-based insurance for droughts and floods, assessed through an online survey. Results show a willingness to pay (WTP) of 1.4% of their annual revenue for drought and 1.3% for flood coverage. Factors influencing WTP for drought schemes include the utility’s location, availability of alternative water sources, and the participant’s gender. WTP for flood schemes is influenced by the availability of alternative water sources, abstraction type, participants’ role, and water source type. This evidence of demand for such insurance products suggests that index-based insurance could open new business opportunities and improve hydroclimatic risk management for water utilities.
