Flooding, homes and loss: insurance as a risk-transfer mechanism in Vietnam

As climate change threatens low-income communities with intensified environmental risks, the need to provide mechanisms to help poor households cope with these risks grows. In Vietnam, deltaic low-income communities are at high risk of flooding, resulting in catastrophic damage and associated costs. Many households have to pay for materials and labour when preparing for and recovering from floods, which can represent a significant portion of their annual income. One mechanism to help communities cope with the costs of intensifying floods is index-based insurance. In a recent study, 66 per cent of respondents expressed an interest in such a scheme. Households in heavily flooded areas are especially interested in government-supplied insurance. This means that there is a clear role for government involvement in index-based insurance, ranging from promoting flood preparations to reduce vulnerability to providing the risk-transfer mechanism itself.