As the international community places increasing emphasis on disaster prevention, there is growing interest in the potential of insurance as part of an effective ex ante risk-management strategy. Insurance does not reduce the immediate impacts of disaster, but by pooling risks in exchange for a premium payment it does provide indemnification against losses. People affected by a disaster benefit from the contributions of the many others who are not affected and thus receive compensation that is greater than their premium payments. Microinsurance is distinguished from other types of insurance by its provision of affordable cover to low-income clients. By providing timely financial assistance following extreme-event shocks, it reduces the long-term consequences of disasters.