This study provides an in-depth review of microinsurance by analysing a range of case studies and examining the benefits and limitations of microinsurance. It provides clear evidence of the value and potential of microinsurance in transferring risk and protecting low-income households and businesses against disaster losses.Microinsurance can provide access to post-disaster finance, protecting assets and livelihoods as well as providing funds for reconstruction. Because insured households are more creditworthy, insurance can also promote investments in productive assets. Moreover, insurance can encourage investment in disaster prevention if insurers offer lower premiums to reward risk-reducing behaviour. The study suggests microinsurance can be considered as an effective risk-transfer mechanism and an integral part of an overall disaster risk management strategy.Key challenges and next steps for the evolving microinsurance agenda include:ensuring the financial sustainability of microinsurance providers, while at the same time providing affordable premiums to poor and high-risk communitiesthere is a lack of direct links and incentives on the part of current microinsurance programmes to reduce the direct losses from disastersinsurers must guard against insolvency by diversifying their portfolios geographically, limiting exposure and/or transferring their risks to the global reinsurance and financial marketsthere is a need for partnerships and institutional frameworks that contribute to
credible and trusted microinsurance systems. Safety nets for high-risk poor communities cannot be put into place without public–private alliancesan emerging new role for donors in supporting these schemes is the Global Index Insurance Facility, shifting donor focus from reaction to risk poolingcurrent pilot programs need to be “scaled up” to cover the large number of low-income households and farms facing risks from natural disastersto bridge the gap between microinsurance opportunities an the disaster risk management community, an international task force on risk transfer could be established. This could contribute to better assessing the scope and potential for microinsurance in exposed developing countries.