  In this article, we assess the benefits of coordination and partnerships
between governments and private insurers, and provide further evidence for
microinsurance products as powerful and cost-effective tools for achieving
poverty reduction. To explore these ideas, we model the capital of a household
from a ruin-theoretic perspective to measure the impact of microinsurance on
poverty dynamics and the governmental cost of social protection. We analyse the
model under four frameworks: uninsured, insured (without subsidies), insured
with subsidised constant premiums and insured with subsidised flexible
premiums. Although insurance alone (without subsidies) may not be sufficient to
reduce the likelihood of falling into the area of poverty for specific groups
of households, since premium payments constrain their capital growth, our
analysis suggests that subsidised schemes can provide maximum social benefits
while reducing governmental costs.
