TY  - JOUR
A1  - Guzman, Diego A.
A1  - Samprogna Mohor, Guilherme
A1  - Mendiondo, Eduardo Mario
T1  - Multi-year index-based insurance for adapting Water Utility Companies to hydrological drought
BT  - case study of a water supply system of the Sao Paulo metropolitan region, Brazil
JF  - Water
N2  - The sustainability of water utility companies is threatened by non-stationary drivers, such as climate and anthropogenic changes. To cope with potential economic losses, instruments such as insurance are useful for planning scenarios and mitigating impacts, but data limitations and risk uncertainties affect premium estimation and, consequently, business sustainability. This research estimated the possible economic impacts of business interruption to the Sao Paulo Water Utility Company derived from hydrological drought and how this could be mitigated with an insurance scheme. Multi-year insurance (MYI) was proposed through a set of "change" drivers: the climate driver, through forcing the water evaluation and planning system (WEAP) hydrological tool; the anthropogenic driver, through water demand projections; and the economic driver, associated with recent water price policies adopted by the utility company during water scarcity periods. In our study case, the evaluated indices showed that MYI contracts that cover only longer droughts, regardless of the magnitude, offer better financial performance than contracts that cover all events (in terms of drought duration). Moreover, through MYI contracts, we demonstrate solvency for the insurance fund in the long term and an annual average actuarially fair premium close to the total expected revenue reduction.
KW  - multi-year insurance
KW  - climate change
KW  - hydrological drought
KW  - water
KW  - security and economy
Y1  - 2020
U6  - https://doi.org/10.3390/w12112954
SN  - 2073-4441
VL  - 12
IS  - 11
PB  - MDPI
CY  - Basel
ER  -