Innovative Financial Instruments for Natural Disaster Risk Management
AbstractThis technical paper provides us with an in-depth explanation of how losses due to catastrophes are insured and who absorbs the costs of compensating the insured assets. In the absence of an effective insurance market, the government often becomes the de facto financier of postdisaster rehabilitation efforts. Alternatively, governments can encourage the local insurance industry to engage in risk financing arrangements through insurance pools that, in turn, may cover higher exposures in the global reinsurance and capital markets. This study takes a closer look at how this type of international risk financing scheme might be developed. This paper is an insider's primer on insurance, reinsurance and new capital market instruments that make it possible to continue to respond to the impacts of recurrent natural disasters.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Inter-American Development Bank in its series IDB Publications with number 30738.
Date of creation: Dec 2002
Date of revision:
Disasters; Financial Markets; Financial Risk; Environment; natural disaster; risk management;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- David M. Cutler & Richard J. Zeckhauser, 1997.
"Reinsurance for Catastrophes and Cataclysms,"
NBER Working Papers
5913, National Bureau of Economic Research, Inc.
- David Cummins & Christopher Lewis & Richard Phillips, 1999.
"Pricing Excess-of-Loss Reinsurance Contracts against Cat as trophic Loss,"
in: The Financing of Catastrophe Risk, pages 93-148
National Bureau of Economic Research, Inc.
- J. David Cummins & Christopher M. Lewis & Richard D. Phillips, 1998. "Pricing Excess-of-loss Reinsurance Contracts Against Catastrophic Loss," Center for Financial Institutions Working Papers 98-09, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Kunreuther, Howard, 1996. "Mitigating Disaster Losses through Insurance," Journal of Risk and Uncertainty, Springer, vol. 12(2-3), pages 171-87, May.
- Dong, Weimin & Shah, Haresh & Wong, Felix, 1996. "A Rational Approach to Pricing of Catastrophe Insurance," Journal of Risk and Uncertainty, Springer, vol. 12(2-3), pages 201-18, May.
- O'Brien, Thomas, 1997. "Hedging strategies using catastrophe insurance options," Insurance: Mathematics and Economics, Elsevier, vol. 21(2), pages 153-162, November.
- Kenneth A. Froot, 2001.
"The Market for Catastrophe Risk: A Clinical Examination,"
NBER Working Papers
8110, National Bureau of Economic Research, Inc.
- Froot, Kenneth A., 2001. "The market for catastrophe risk: a clinical examination," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 529-571, May.
- Kenneth A. Froot, 1999. "The Market for Catastrophe Risk: A Clinical Examination," NBER Working Papers 7286, National Bureau of Economic Research, Inc.
- Howard Kunreuther, 2001. "Mitigation and Financial Risk Management for Natural Hazards*," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan, vol. 26(2), pages 277-296, April.
- Sanford Grossman & Oliver Hart, .
"An Analysis of the Principal-Agent Problem,"
Rodney L. White Center for Financial Research Working Papers
15-80, Wharton School Rodney L. White Center for Financial Research.
- Kenneth A. Froot & Paul G. J. O'Connell, 1999.
"The Pricing of U.S. Catastrophe Reinsurance,"
in: The Financing of Catastrophe Risk, pages 195-232
National Bureau of Economic Research, Inc.
- Dwight M. Jaffee & Thomas Russell, 1996. "Catastrophe Insurance, Capital Markets and Uninsurable Risks," Center for Financial Institutions Working Papers 96-12, Wharton School Center for Financial Institutions, University of Pennsylvania.
- John Major, 1999. "Index Hedge Performance: Insurer Market Penetration and Basis Risk," NBER Chapters, in: The Financing of Catastrophe Risk, pages 391-432 National Bureau of Economic Research, Inc.
- Paul Kleindorfer & Howard Kunreuther, 1999. "Challenges Facing the Insurance Industry in Managing Catastrophic Risks," NBER Chapters, in: The Financing of Catastrophe Risk, pages 149-194 National Bureau of Economic Research, Inc.
- Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 630-49, November.
- James G. Bohn & Brian Hall, 1999. "The Moral Hazard of Insuring the Insurers," NBER Chapters, in: The Financing of Catastrophe Risk, pages 363-390 National Bureau of Economic Research, Inc.
- Caroline Clarke & Céline Charvériat & Sergio Mora-Castro & Michael Collins & Kari Keipi, 2000. "Facing the Challenge of Natural Disasters in Latin America and the Caribbean: An IDB Action Plan," IDB Publications 30978, Inter-American Development Bank.
- Perez-Maqueo, O. & Intralawan, A. & Martinez, M.L., 2007. "Coastal disasters from the perspective of ecological economics," Ecological Economics, Elsevier, vol. 63(2-3), pages 273-284, August.
- Jerry R. Skees & Barry J. Barnett & Anne G. Murphy, 2008.
"Creating insurance markets for natural disaster risk in lower income countries: the potential role for securitization,"
Agricultural Finance Review,
Emerald Group Publishing, vol. 68(1), pages 151-167, September.
- Skees, Jerry R. & Barnett, Barry J. & Murphy, Anne G., 2007. "Creating insurance markets for natural disaster risk in lower income countries: the potential role for securitization," 101st Seminar, July 5-6, 2007, Berlin Germany 9272, European Association of Agricultural Economists.
- Nat J. Coletta, 2004. "Human-Driven Disasters: Violent Conflict, Terrorism and Technology," IDB Publications 30698, Inter-American Development Bank.
- Juan José Durante & Kurt S. Focke & Guillermo J. Collich & Mario Marcel & Torben Andersen, 2010. "Natural Disasters Financial Risk Management : Technical and Policy Underpinnings for the Use of Disaster-Linked Financial Instruments in Latin America and the Caribbean," IDB Publications 11118, Inter-American Development Bank.
- Andrés Solimano, 2003. "Prevention and Insurance of Conflict and Terrorism: Issues and Evidence for Latin America," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 40(121), pages 617-625.
- Eduardo Cavallo & Ilan Noy, 2009.
"The Economics of Natural Disasters - A Survey,"
200919, University of Hawaii at Manoa, Department of Economics.
- Ivar Pettersen & John Magne Skjelvik & Nils Atle Krokeide, 2005. "Exploiting International Financial Markets to Manage Natural Hazard Risks in Latin America," IDB Publications 30578, Inter-American Development Bank.
- Stuart Miller & Kari Keipi, 2005. "Strategies and Financial Instruments for Disaster Risk Management in Latin America and the Caribbean," IDB Publications 33479, Inter-American Development Bank.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Luis Daniel Martinez).
If references are entirely missing, you can add them using this form.