  In this article, we consider a compound Poisson-type model for households'
capital. Using risk theory techniques, we determine the probability of a
household falling under the poverty line. Microinsurance is then introduced to
analyse its impact as an insurance solution for the lower income class. Our
results validate those previously obtained with this type of model, showing
that microinsurance alone is not sufficient to reduce the probability of
falling into the area of poverty for specific groups of people, since premium
payments constrain households' capital growth. This indicates the need for
additional aid particularly from the government. As such, we propose several
premium subsidy strategies and discuss the role of government in subsidising
microinsurance to help reduce poverty.
