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- Permanent Link:
- http://dpanther.fiu.edu/dpService/dpPurlService/purl/FI13042416/00001
Notes
- Summary:
- This publication uses case studies to present the various solutions being provided by the insurance sector to help narrow the distance between economic and insured losses related to disaster. It presents these insurance products to government policymakers as one component in the development of a comprehensive approach to risk management. In the first section, focus is directed towards the rising costs of disasters over the past few decades. In the 1980s, costs were on average about $25 billion a year. In the 1990s, this increased to $95 billion. In the last decade, the annual average rose to nearly $130 billion. This exponential increase in economic loss related to disasters is believed to be a by-product of economic development and rapid population growth in coastal zones increasingly vulnerable to the dictates of climate change. To make matters worse, only 20 to 40 percent of these economic losses were covered by insurance. Coverage is especially lacking in the developing world. Often, the document stresses, it is the public sector that ends up covering the costs of all phases of managing disaster, including supporting rebuilding efforts of uninsured private individuals and companies. Such measures often hurt already suffering economies, and increase the country’s debt burden. It also cautions against relying heavily on international aid, which is not guaranteed to be timely nor sufficient to address post-disaster needs. The document advocates that risk be distributed more broadly, and financing to manage the costs of disaster be diversified. It highlights a number of new forms of public-private partnerships and risk transfer solutions such as indemnity insurance, parametric insurance, weather insurance, and insurance-linked securities. The last section of the document features a selection of case studies where governments have invested in innovative insurance products to protect against losses caused by natural disasters. Financial risk transfer mechanisms should not be viewed in isolation, but as key components in a broader understanding of risk management, which includes risk identification, risk assessment, risk mitigation, and risk adaptation. Such an approach involves governments minimizing risks where they can and transferring costs where the former is not possible. The implementation of a comprehensive strategy for managing risks by governments is crucial to enabling the development of a private insurance sector, which inevitably lowers the burden of disasters for government. Post-event disaster financing should be reserved for when all other risk-transfer solutions have been utilized, meaning that it will cover less significant losses. ( English )
- Subject:
- Risk Transfer ( English )
- Citation/Reference:
- Reichenmiller, P., Fehr, K. (2011). Closing the financial gap: new partnerships between the public and private sectors to finance disaster risks. Swiss Reinsurance Company.
Record Information
- Source Institution:
- Florida International University
- Rights Management:
- Refer to main document/publisher for use rights.
- Resource Identifier:
- FI13042416
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