Catastrophe Risk Management : Using Alternative Risk Financing and Insurance Pooling Mechanisms

Residual stochastic risks from catastrophic natural events can be addressed through insurance pooling and risk transfer mechanisms that provide the basis for financial protection and instill strong incentives for reducing vulnerability. To reduce t...

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Main Author:	Pollner, John D.
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2014
Subjects:	ACCOUNTING ACCOUNTING PRINCIPLES ANNUITY APPLICATIONS ATTACHMENT POINT BALANCE SHEETS BONDS CAPITAL BASE CAPITAL MARKETS CAPITAL REQUIREMENT CATASTROPHE COVERAGE CATASTROPHE REINSURANCE CATASTROPHES CATASTROPHIC RISKS COMMISSIONS CONSOLIDATION CONTRACTUAL SAVINGS DEBT DISASTERS EASTERN CARIBBEAN CENTRAL BANK ECONOMIES OF SCALE FINANCIAL ASSETS FINANCIAL INSTRUMENTS FINANCIAL MANAGEMENT FINANCIAL MARKETS FINANCIAL RISK FINANCIAL SECTOR FINANCIAL STRUCTURE GUARANTY FUNDS INDEMNITY INSURABLE ASSETS INSURANCE INSURANCE COMPANIES INSURANCE COVERAGE INSURANCE INDUSTRIES INSURANCE INDUSTRY INSURANCE MARKETS INSURANCE POLICIES INSURANCE RATES INSURANCE RESERVES INSURANCE RISK INSURANCE SUPERVISORS INSURANCE SYSTEM INSURERS INTEGRITY INTERNATIONAL FINANCE INTERNATIONAL FINANCIAL MARKETS INVESTMENT BANKERS LOW INCOME MARKET FORCES MARKET INCENTIVES MINISTRIES OF FINANCE MITIGATION MORAL HAZARDS POLICY RESEARCH POLICYHOLDERS PREMIUMS PRESENT VALUE PRIMARY INSURER PRIVATE SECTOR PROBABILITY OF DEFAULT PROFITABILITY PROGRAMS PROPERTY INSURANCE PROPERTY RISK PUBLIC INSURANCE REGULATORY FRAMEWORK REINSURANCE REINSURANCE CONTRACT REINSURANCE CONTRACTS REINSURANCE MARKETS REINSURERS RISK ASSESSMENT RISK ASSESSMENTS RISK INSURANCE RISK MANAGEMENT RISK REDUCTION RISK SHARING RISK TRANSFER RISK UNDERWRITING SECURITIES SECURITIZATION SELF INSURANCE SOLVENCY SOLVENCY REQUIREMENTS SUSTAINABILITY UNDERWRITING
Online Access:	http://documents.worldbank.org/curated/en/2001/02/1047385/catastrophe-risk-management-using-alternative-risk-financing-insurance-pooling-mechanisms http://hdl.handle.net/10986/19706

id	okr-10986-19706
recordtype	oai_dc
spelling	okr-10986-197062021-04-23T14:03:44Z Catastrophe Risk Management : Using Alternative Risk Financing and Insurance Pooling Mechanisms Pollner, John D. ACCOUNTING ACCOUNTING PRINCIPLES ANNUITY APPLICATIONS ATTACHMENT POINT BALANCE SHEETS BONDS CAPITAL BASE CAPITAL MARKETS CAPITAL REQUIREMENT CATASTROPHE COVERAGE CATASTROPHE REINSURANCE CATASTROPHES CATASTROPHIC RISKS COMMISSIONS CONSOLIDATION CONTRACTUAL SAVINGS DEBT DISASTERS EASTERN CARIBBEAN CENTRAL BANK ECONOMIES OF SCALE FINANCIAL ASSETS FINANCIAL INSTRUMENTS FINANCIAL MANAGEMENT FINANCIAL MARKETS FINANCIAL RISK FINANCIAL SECTOR FINANCIAL STRUCTURE GUARANTY FUNDS INDEMNITY INSURABLE ASSETS INSURANCE INSURANCE COMPANIES INSURANCE COVERAGE INSURANCE INDUSTRIES INSURANCE INDUSTRY INSURANCE MARKETS INSURANCE POLICIES INSURANCE RATES INSURANCE RESERVES INSURANCE RISK INSURANCE SUPERVISORS INSURANCE SYSTEM INSURERS INTEGRITY INTERNATIONAL FINANCE INTERNATIONAL FINANCIAL MARKETS INVESTMENT BANKERS LOW INCOME MARKET FORCES MARKET INCENTIVES MINISTRIES OF FINANCE MITIGATION MORAL HAZARDS POLICY RESEARCH POLICYHOLDERS PREMIUMS PRESENT VALUE PRIMARY INSURER PRIVATE SECTOR PROBABILITY OF DEFAULT PROFITABILITY PROGRAMS PROPERTY INSURANCE PROPERTY RISK PUBLIC INSURANCE REGULATORY FRAMEWORK REINSURANCE REINSURANCE CONTRACT REINSURANCE CONTRACTS REINSURANCE MARKETS REINSURERS RISK ASSESSMENT RISK ASSESSMENTS RISK INSURANCE RISK MANAGEMENT RISK REDUCTION RISK SHARING RISK TRANSFER RISK UNDERWRITING SECURITIES SECURITIZATION SELF INSURANCE SOLVENCY SOLVENCY REQUIREMENTS SUSTAINABILITY UNDERWRITING Residual stochastic risks from catastrophic natural events can be addressed through insurance pooling and risk transfer mechanisms that provide the basis for financial protection and instill strong incentives for reducing vulnerability. To reduce the economic stress after disasters, the author shows, World Bank instruments could be used to support initiaitves to help correct market imperfections in catastrophe insurance. He takes a step-by-step approach to showing how both risk pooling structures and alternative catastrophe coverage mechanisms (long-maturity risk financing facilities, weather-indexed contracts, and capital market instruments) can achieve better risk protection and financing terms--enough to allow the expansion of insurance coverage of public assets and private property. The author examines the insurable assets (private and public) in eight countries in the easternmost part of the Caribbean and, by quantifying the portion of the premium and risk used to fund catastrophe losses, shows that through pooling and the use of credit-type instruments for catastrophe coverage, governments and uninsured property owners or enterprises (with insurable assets) could expect to improve their terms of coverage. Neither local insurers nor reinsurers would suffer in profitability. The risk management options the author examines could lead to real benefits for all participants (buyers and sellers) in insurance markets. But four factors are essential for ensuring the integrity of any participatory insurance scheme for providing risk management in disaster-prone areas such as the Caribbean: 1) stronger regulatory requirements and supervision in the insurance sector; 2) Broad-based, pooled catastrophe funding structures with efficient risk transfer tools; 3) Public insurance policies linked to programs for loss reduction in uninsured sectors; and 4) Stronger risk assessment and enforcement of such structural measures as zoning and compliance with building codes. 2014-08-26T19:32:56Z 2014-08-26T19:32:56Z 2001-02 http://documents.worldbank.org/curated/en/2001/02/1047385/catastrophe-risk-management-using-alternative-risk-financing-insurance-pooling-mechanisms http://hdl.handle.net/10986/19706 English en_US Policy Research Working Paper;No. 2560 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Caribbean
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	ACCOUNTING ACCOUNTING PRINCIPLES ANNUITY APPLICATIONS ATTACHMENT POINT BALANCE SHEETS BONDS CAPITAL BASE CAPITAL MARKETS CAPITAL REQUIREMENT CATASTROPHE COVERAGE CATASTROPHE REINSURANCE CATASTROPHES CATASTROPHIC RISKS COMMISSIONS CONSOLIDATION CONTRACTUAL SAVINGS DEBT DISASTERS EASTERN CARIBBEAN CENTRAL BANK ECONOMIES OF SCALE FINANCIAL ASSETS FINANCIAL INSTRUMENTS FINANCIAL MANAGEMENT FINANCIAL MARKETS FINANCIAL RISK FINANCIAL SECTOR FINANCIAL STRUCTURE GUARANTY FUNDS INDEMNITY INSURABLE ASSETS INSURANCE INSURANCE COMPANIES INSURANCE COVERAGE INSURANCE INDUSTRIES INSURANCE INDUSTRY INSURANCE MARKETS INSURANCE POLICIES INSURANCE RATES INSURANCE RESERVES INSURANCE RISK INSURANCE SUPERVISORS INSURANCE SYSTEM INSURERS INTEGRITY INTERNATIONAL FINANCE INTERNATIONAL FINANCIAL MARKETS INVESTMENT BANKERS LOW INCOME MARKET FORCES MARKET INCENTIVES MINISTRIES OF FINANCE MITIGATION MORAL HAZARDS POLICY RESEARCH POLICYHOLDERS PREMIUMS PRESENT VALUE PRIMARY INSURER PRIVATE SECTOR PROBABILITY OF DEFAULT PROFITABILITY PROGRAMS PROPERTY INSURANCE PROPERTY RISK PUBLIC INSURANCE REGULATORY FRAMEWORK REINSURANCE REINSURANCE CONTRACT REINSURANCE CONTRACTS REINSURANCE MARKETS REINSURERS RISK ASSESSMENT RISK ASSESSMENTS RISK INSURANCE RISK MANAGEMENT RISK REDUCTION RISK SHARING RISK TRANSFER RISK UNDERWRITING SECURITIES SECURITIZATION SELF INSURANCE SOLVENCY SOLVENCY REQUIREMENTS SUSTAINABILITY UNDERWRITING
spellingShingle	ACCOUNTING ACCOUNTING PRINCIPLES ANNUITY APPLICATIONS ATTACHMENT POINT BALANCE SHEETS BONDS CAPITAL BASE CAPITAL MARKETS CAPITAL REQUIREMENT CATASTROPHE COVERAGE CATASTROPHE REINSURANCE CATASTROPHES CATASTROPHIC RISKS COMMISSIONS CONSOLIDATION CONTRACTUAL SAVINGS DEBT DISASTERS EASTERN CARIBBEAN CENTRAL BANK ECONOMIES OF SCALE FINANCIAL ASSETS FINANCIAL INSTRUMENTS FINANCIAL MANAGEMENT FINANCIAL MARKETS FINANCIAL RISK FINANCIAL SECTOR FINANCIAL STRUCTURE GUARANTY FUNDS INDEMNITY INSURABLE ASSETS INSURANCE INSURANCE COMPANIES INSURANCE COVERAGE INSURANCE INDUSTRIES INSURANCE INDUSTRY INSURANCE MARKETS INSURANCE POLICIES INSURANCE RATES INSURANCE RESERVES INSURANCE RISK INSURANCE SUPERVISORS INSURANCE SYSTEM INSURERS INTEGRITY INTERNATIONAL FINANCE INTERNATIONAL FINANCIAL MARKETS INVESTMENT BANKERS LOW INCOME MARKET FORCES MARKET INCENTIVES MINISTRIES OF FINANCE MITIGATION MORAL HAZARDS POLICY RESEARCH POLICYHOLDERS PREMIUMS PRESENT VALUE PRIMARY INSURER PRIVATE SECTOR PROBABILITY OF DEFAULT PROFITABILITY PROGRAMS PROPERTY INSURANCE PROPERTY RISK PUBLIC INSURANCE REGULATORY FRAMEWORK REINSURANCE REINSURANCE CONTRACT REINSURANCE CONTRACTS REINSURANCE MARKETS REINSURERS RISK ASSESSMENT RISK ASSESSMENTS RISK INSURANCE RISK MANAGEMENT RISK REDUCTION RISK SHARING RISK TRANSFER RISK UNDERWRITING SECURITIES SECURITIZATION SELF INSURANCE SOLVENCY SOLVENCY REQUIREMENTS SUSTAINABILITY UNDERWRITING Pollner, John D. Catastrophe Risk Management : Using Alternative Risk Financing and Insurance Pooling Mechanisms
geographic_facet	Caribbean
relation	Policy Research Working Paper;No. 2560
description	Residual stochastic risks from catastrophic natural events can be addressed through insurance pooling and risk transfer mechanisms that provide the basis for financial protection and instill strong incentives for reducing vulnerability. To reduce the economic stress after disasters, the author shows, World Bank instruments could be used to support initiaitves to help correct market imperfections in catastrophe insurance. He takes a step-by-step approach to showing how both risk pooling structures and alternative catastrophe coverage mechanisms (long-maturity risk financing facilities, weather-indexed contracts, and capital market instruments) can achieve better risk protection and financing terms--enough to allow the expansion of insurance coverage of public assets and private property. The author examines the insurable assets (private and public) in eight countries in the easternmost part of the Caribbean and, by quantifying the portion of the premium and risk used to fund catastrophe losses, shows that through pooling and the use of credit-type instruments for catastrophe coverage, governments and uninsured property owners or enterprises (with insurable assets) could expect to improve their terms of coverage. Neither local insurers nor reinsurers would suffer in profitability. The risk management options the author examines could lead to real benefits for all participants (buyers and sellers) in insurance markets. But four factors are essential for ensuring the integrity of any participatory insurance scheme for providing risk management in disaster-prone areas such as the Caribbean: 1) stronger regulatory requirements and supervision in the insurance sector; 2) Broad-based, pooled catastrophe funding structures with efficient risk transfer tools; 3) Public insurance policies linked to programs for loss reduction in uninsured sectors; and 4) Stronger risk assessment and enforcement of such structural measures as zoning and compliance with building codes.
format	Publications & Research :: Policy Research Working Paper
author	Pollner, John D.
author_facet	Pollner, John D.
author_sort	Pollner, John D.
title	Catastrophe Risk Management : Using Alternative Risk Financing and Insurance Pooling Mechanisms
title_short	Catastrophe Risk Management : Using Alternative Risk Financing and Insurance Pooling Mechanisms
title_full	Catastrophe Risk Management : Using Alternative Risk Financing and Insurance Pooling Mechanisms
title_fullStr	Catastrophe Risk Management : Using Alternative Risk Financing and Insurance Pooling Mechanisms
title_full_unstemmed	Catastrophe Risk Management : Using Alternative Risk Financing and Insurance Pooling Mechanisms
title_sort	catastrophe risk management : using alternative risk financing and insurance pooling mechanisms
publisher	World Bank, Washington, DC
publishDate	2014
url	http://documents.worldbank.org/curated/en/2001/02/1047385/catastrophe-risk-management-using-alternative-risk-financing-insurance-pooling-mechanisms http://hdl.handle.net/10986/19706
_version_	1764440409486917632

Catastrophe Risk Management : Using Alternative Risk Financing and Insurance Pooling Mechanisms

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