-
The ability to share risk efficiently in the economy is essential to welfare and growth. However, the increased frequency of natural catastrophes over the last decade has raised once again questions associated to the limits of insurability in a free markets economy, and to the relevance of public interventions on risk-sharing markets.
-
-
Over the last years the insurance and reinsurance markets have been deeply affected by a series of non-correlated factors: the aftermath of the World Trade Center terrorist attacks, the increasing frequency and severity of natural disasters, major disruptions in financial markets and concerns related to liability uncertainty.
-
-
Much research and policy on terrorism insurance compares terrorism to natural catastrophes, but this obscures the national security dimension of terrorism insurance. In this chapter, it is argued that government support of terrorism insurance and compensation can impact national security in several ways.
-
The aftermath of the 11th September events has deeply affected the aviation insurance market, requiring government intervention at least in a recovery period. Immediately after the events, insurance companies cancelled policies with war risk covers and introduced exclusions clauses for war risks in new contracts or/and limited damage claims to a maximum of US$50m.
-
-
-
-
This chapter begins by a brief overview of the credit derivatives market and the structures of credit default swaps (which are highly relevant to our discussion of catastrophe-linked derivatives). It then looks at catastrophe-linked derivatives and two ideas for new instruments to cover terrorism risk—catastrophe risk swaps and swaptions—and some of the challenges and advantages to the development of these products.
-
Catastrophe bonds (“cat bonds”) are structured finance instruments devised to transfer catastrophe risk to the capital markets. The bonds appeal both to sponsors and investors, and provide a general economic benefit as well, in that they help to distribute some of the financial risk associated with insurance payouts on major disasters.
-
This chapter first compares the large-scale compensation scheme of sixteen OECD countries. The role of the private market and governments in coping with the catastrophe losses is then described. Three groupings of the varied government programs are made based on whether the government primarily acts as insurer, reinsurer or underwriter of catastrophe risk.
-
-
The Hungarian and Turkish governments have recently implemented national insurance systems to transfer risks from floods and earthquakes, respectively, from households to public insurance pools. To date, neither system has met the expectations of the respective governments in terms of insurance uptake and political support.
-
-
Japan is a particularly exposed country in respect of earthquakes, tsunamis and volcanic eruptions. In order to address these potentially catastrophic risks, which often lead to disastrous human and economic losses in Japan, the government first established in 1966 the Earthquake Insurance System backed by the State Budget.
-
-
In December 1954, the ‘Consorcio’ became the masterpiece in one of the oldest State backed systems dealing with Extraordinary Risk Cover, terms that in this system include perils of nature (flood, earthquake, volcanic eruption, storms) and socio-political risks, essentially terrorism. This chapter provides an overview of the Consorcio and its main reforms.
-
-
China’s disaster prevention, disaster resistance and disaster relief system as well as its social mobilizing system have generally played a crucial role to cope with the losses arising from natural disasters. These systems have effectively eased the damage caused by natural disasters, guaranteed the basic living of people in disaster areas and also maintained the social stability together with the economic development.
-
-
-
-
This chapter first highlights the particular risk-exposure of the Philippines to disasters and calamities. It then provides an overview of the Philippine Disaster Management System, of the comprehensive emergency management framework and of the funding mechanism of these disaster management programs. It also presents a project for a risk transfer scheme to cope with natural disasters.
-