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Designing Optimal Risk Mitigation and Risk Transfer Mechanisms to Improve the Management of Earthquake Risk in Chile

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  • Robert Muir-Wood
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    Abstract

    The property losses from the Feb 27th 2010 Maule earthquake are assessed as $18.1Bn paid for 38% by insurers, 47% by the Government of Chile and 15% by individuals and businesses. Including $4Bn damage to infrastructure and the costs of lost economic activity the total loss in 2010 values is estimated to have been close to $28Bn. The report considers policy options for expanding the proportion of future Chilean earthquake losses that would be covered via new and expanded risk transfer mechanisms: for low income homeowners, small commercial enterprises and government buildings. Consideration is also given to how the overall levels of earthquake risk in Chile could be reduced through targeted efforts at risk mitigation. Recommendations are made for how the insurance industry and government in Chile should expand the use of probabilistic catastrophe loss models for defining and pricing risk management options. Concevoir les meilleurs mécanismes possibles d'atténuation et de transfert des risques pour améliorer la gestion du risque sismique au Chili Les sinistres immobiliers causés par le tremblement de terre qui a frappé, le 27 février 2010, la ville de Maule au Chili sont évalués à 18.1 milliards USD, pris en charge à hauteur de 38 % par les assureurs, de 47 % par l’État chilien et de 15 % par les particuliers et les entreprises. Si l’on y ajoute les 4 milliards USD de dommages aux infrastructures et les coûts liés à la perte d’activité économique, on estime que le montant total du sinistre avoisinait, en 2010, 28 milliards USD. Le rapport analyse les solutions permettant aux pouvoirs publics chiliens d’augmenter la proportion des futurs sinistres sismiques qui pourrait être couverte par des mécanismes nouveaux et renforcés de transfert des risques, applicables aussi bien aux propriétaires de logement à faible revenu, aux petites entreprises commerciales et aux bâtiments publics. Il étudie en outre comment le Chili pourrait réduire son risque sismique global en ciblant ses efforts d’atténuation des risques. Le rapport contient par ailleurs des recommandations sur le fait que le secteur de l’assurance et les pouvoirs publics chiliens devraient davantage utiliser des modèles probabilistes de sinistre catastrophique pour définir et déterminer le coût des différentes solutions de gestion des risques.

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    File URL: http://dx.doi.org/10.1787/5kg26lpfxcr5-en
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    Bibliographic Info

    Paper provided by OECD Publishing in its series OECD Working Papers on Finance, Insurance and Private Pensions with number 12.

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    Date of creation: Nov 2011
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    Handle: RePEc:oec:dafaad:12-en

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    Related research

    Keywords: catastrophe insurance; Catastrophe risk securitization; Catastrophe model; risk financing; Microinsurance; risk mitigation; Assurance de risques catastrophiques; titrisation des risques catastrophiques; micro-assurance; Réduction des risques; Financement des risques; modélisation du risque catastrophique;

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    Cited by:
    1. Olivier Mahul & Emily White, 2012. "Earthquake Risk Insurance," World Bank Other Operational Studies 16149, The World Bank.

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