Self-Insurance Against Natural Disasters: The Use of Pension Funds in Pacific Island Countries
By Si Guo (International Monetary Fund (IMF)) & Futoshi Narita
Pacific island countries are exposed to significant risks from natural disasters. As adisaster relief measure, Fiji allowed pre-retirement pension withdrawls in the wake ofCyclone Winston in 2016. Motivated by this policy action, we provide a normativeanalysis of the use of early pension withdrawals after disasters, by setting up a life-cyclesaving model with myopic households facing large natural disaster shocks. The modeldemonstrates the key trade-off between building up sufficient retirement savings andensuring the access to savings against natural disaster shocks, and sheds light on welfareimplications of early pension withdrawals.