Mitigating Drought Financial Risk for Water Supply Sector through Index-Based Insurance Contracts

Gesualdo, Gabriela C.; R. Benso, Marcos; R. Navarro, Fabrício A.; Castillo, Luis M.; Mendiondo, Eduardo M.

doi:https://doi.org/10.5194/piahs-385-117-2024

Articles | Volume 385

https://doi.org/10.5194/piahs-385-117-2024

© Author(s) 2024. This work is distributed under
the Creative Commons Attribution 4.0 License.

https://doi.org/10.5194/piahs-385-117-2024

© Author(s) 2024. This work is distributed under
the Creative Commons Attribution 4.0 License.

Articles | Volume 385

Post-conference publication

|

18 Apr 2024

Post-conference publication |

| 18 Apr 2024

Mitigating Drought Financial Risk for Water Supply Sector through Index-Based Insurance Contracts

Gabriela C. Gesualdo, Marcos R. Benso, Fabrício A. R. Navarro, Luis M. Castillo, and Eduardo M. Mendiondo

Data sets

The ERA5 global reanalysis Hans Hersbach, Bill Bell, Paul Berrisford, Shoji Hirahara, András Horányi, Joaquín Muñoz-Sabater, Julien Nicolas, Carole Peubey, Raluca Radu, Dinand Schepers, Adrian Simmons, Cornel Soci, Saleh Abdalla, Xavier Abellan, Gianpaolo Balsamo, Peter Bechtold, Gionata Biavati, Jean Bidlot, Massimo Bonavita, Giovanna De Chiara, Per Dahlgren, Dick Dee, Michail Diamantakis, Rossana Dragani, Johannes Flemming, Richard Forbes, Manuel Fuentes, Alan Geer, Leo Haimberger, Sean Healy, Robin J. Hogan, Elías Hólm, Marta Janisková, Sarah Keeley, Patrick Laloyaux, Philippe Lopez, Cristina Lupu, Gabor Radnoti, Patricia de Rosnay, Iryna Rozum, Freja Vamborg, Sebastien Villaume, and Jean-Noël Thépaut https://doi.org/10.1002/QJ.3803

Daily gridded meteorological variables in Brazil (1980–2013) Alexandre C. Xavier, Carey W. King, and Bridget R. Scanlon https://doi.org/10.1002/joc.4518

Short summary

We simulated indexed insurance for a water utility responsible for providing water to 7.2 million people in a metropolitan region. According to our findings, an annual amount (premium) of USD 0.43, 0.87, and 1.73 should be charged per person to obtain drought coverage for three, six, and twelve months. The premium fee can be implemented in the water bills as a new strategy to pool the risk between the supplied users and the utility, to prevent them from being exposed to surcharge fluctuations.