Statistical analysis of rainfall insurance payouts in southern India

Although there is no evidence of temporal dependence on rainfall insurance payouts in Southern India, rainfall insurance payouts are significantly positively correlated across contracts at a point in time. Meanwhile, ICICI Lombard is a general insurer to rural Indian households since 2003. It was found that insurance payouts are negatively correlated with growth in Indian per capita GDP suggesting that some component of rainfall risk is aggregate to the Indian economy as a whole. The prime cropping season in India is the monsoon season and runs from June to September. it was found out that the indemnities are focused in the extreme end of adverse rainfall events. Households are thus insured against severe shocks. This creates a skewed distribution of losses for an insurer writing rainfall insurance payouts. By holding a portfolio of geographically segmented insurance contracts, or by the use of reinsurance markets, the balance sheet exposure can be partially ameliorated.