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The Role of Natural Disaster Insurance in Recovery and Risk Reduction

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  • Carolyn Kousky

Abstract

Natural disaster losses have been increasing worldwide. Insurance is thought to play a critical role in improving resilience to these events by both promoting recovery and providing incentives for investments in hazard mitigation. This review first examines the functioning of disaster insurance markets broadly and then turns to reviewing empirical studies on the role of natural disaster insurance in recovery and the impacts of disaster insurance on incentives for ex ante hazard mitigation and land use. Rigorous empirical work on these topics is limited. The work that has been done suggests that insurance coverage does improve recovery outcomes, but impacts on risk reduction may be modest. More studies comparing outcomes across insured and uninsured properties are needed, particularly for better understanding the role of insurance in climate adaptation.

Suggested Citation

  • Carolyn Kousky, 2019. "The Role of Natural Disaster Insurance in Recovery and Risk Reduction," Annual Review of Resource Economics, Annual Reviews, vol. 11(1), pages 399-418, October.
    • Handle: RePEc:anr:reseco:v:11:y:2019:p:399-418
    DOI: 10.1146/annurev-resource-100518-094028
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    Cited by:

    1. Christophe Courbage & Maryam Golnaraghi, 2022. "Extreme events, climate risks and insurance," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 47(1), pages 1-4, January.
    2. Owen Sally & Noy Ilan & Pástor-Paz Jacob & Fleming David, 2021. "Measuring the Impact of Insurance on Recovery after Extreme Weather Events Using Nightlights," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 15(2), pages 169-199, July.
    3. Carolyn Kousky & Noelwah R. Netusil, 2023. "Flood insurance literacy and flood risk knowledge: Evidence from Portland, Oregon," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 26(2), pages 175-201, July.
    4. Lorilee A. Medders & Steven L. Schwarcz, 2022. "Securitizing pandemic‐risk insurance," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 25(4), pages 551-583, December.
    5. Vinzenz Peters & Jingtian Wang & Mark Sanders, 2023. "Resilience to extreme weather events and local financial structure of prefecture-level cities in China," Climatic Change, Springer, vol. 176(9), pages 1-21, September.
    6. Kento Komatsubara & Alexander Ryota Keeley & Shunsuke Managi, 2023. "Revisiting the Value of Various Ecosystems: Considering Spatiality and Disaster Concern," Sustainability, MDPI, vol. 15(4), pages 1-27, February.
    7. Kalfin & Sukono & Sudradjat Supian & Mustafa Mamat, 2022. "Insurance as an Alternative for Sustainable Economic Recovery after Natural Disasters: A Systematic Literature Review," Sustainability, MDPI, vol. 14(7), pages 1-18, April.
    8. Graff Zivin, Joshua & Liao, Yanjun & Panassié, Yann, 2023. "How hurricanes sweep up housing markets: Evidence from Florida," Journal of Environmental Economics and Management, Elsevier, vol. 118(C).
    9. Belinda Storey & Sally Owen & Christian Zammit & Ilan Noy, 2024. "Insurance retreat in residential properties from future sea level rise in Aotearoa New Zealand," Climatic Change, Springer, vol. 177(3), pages 1-21, March.
    10. Peng, Yifan & Ando, Amy W. & Gundersen, Craig G., 2023. "Food Bank Responses to Major Disasters," 2023 Annual Meeting, July 23-25, Washington D.C. 335942, Agricultural and Applied Economics Association.
    11. Ferreira, Susana, 2024. "Extreme Weather Events and Climate Change: Economic Impacts and Adaptation Policies," IZA Discussion Papers 16715, Institute of Labor Economics (IZA).
    12. Nicolò Barbieri & Massimiliano Mazzanti & Anna Montini & Andrea Rampa, 2022. "Risk Attitudes to Catastrophic Events: VSL and WTP for Insurance Against Earthquakes," Economics of Disasters and Climate Change, Springer, vol. 6(2), pages 317-337, July.
    13. Meri Davlasheridze & Qing Miao, 2021. "Does post-disaster aid promote community resilience? Evidence from federal disaster programs," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 109(1), pages 63-88, October.
    14. Ho, Anson T.Y. & Huynh, Kim P. & Jacho-Chávez, David T. & Vallée, Geneviève, 2023. "We didn’t start the fire: Effects of a natural disaster on consumers’ financial distress," Journal of Environmental Economics and Management, Elsevier, vol. 119(C).
    15. Kakuho Furukawa & Hibiki Ichiue & Noriyuki Shiraki, 2020. "How Does Climate Change Interact with the Financial System? A Survey," Bank of Japan Working Paper Series 20-E-8, Bank of Japan.
    16. Joakim A. Weill, 2023. "Flood Risk Mapping and the Distributional Impacts of Climate Information," Finance and Economics Discussion Series 2023-066, Board of Governors of the Federal Reserve System (U.S.).
    17. Sahar Zavareh Hofmann, 2022. "Build Back Better and Long-Term Housing Recovery: Assessing Community Housing Resilience and the Role of Insurance Post Disaster," Sustainability, MDPI, vol. 14(9), pages 1-23, May.
    18. Bradt, Jacob T. & Kousky, Carolyn & Wing, Oliver E.J., 2021. "Voluntary purchases and adverse selection in the market for flood insurance," Journal of Environmental Economics and Management, Elsevier, vol. 110(C).
    19. Joakim Weill, 2023. "Flood Risk Mapping and the Distributional Impacts of Climate Information," Working Papers 2023.10, FAERE - French Association of Environmental and Resource Economists.
    20. Yutaro Izumi & Hiroyuki Nakata & Yasuyuki Sawada & Kunio Sekiguchi, 2024. "Building Business Resilience to Disasters," CIRJE F-Series CIRJE-F-1223, CIRJE, Faculty of Economics, University of Tokyo.
    21. Liu, Xian & Noonan, Douglas, 2022. "Building underwater: Effects of community-scale flood management on housing development," Journal of Housing Economics, Elsevier, vol. 57(C).
    22. Jose Cobian & Budy P. Resosudarmo & Alin Halimatussadiah & Susan Olivia, 2022. "Demand for index-based flood insurance in Jakarta, Indonesia," Departmental Working Papers 2022-12, The Australian National University, Arndt-Corden Department of Economics.

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