Explore the vast range of titles available.

The COVID-19 epidemic has seriously affected global economic and social development. The extent to which insurance can play a role in preventing and transferring the risk of infectious diseases has become one of the major concerns of the community. This paper first analyzes the main contents of the U.S. Pandemic Risk Insurance Act during the COVID-19 epidemic and its insights to the global audiences. Then, on the basis of the definition of global pandemic, this paper analyzes the great challenges faced by the insurability of the infectious diseases’ catastrophe from the regional impact, risk accumulation, correlation with capital markets, and accuracy of catastrophe model, and the insurability of local infectious diseases. Finally, this paper presents the key points of the top-level design of the risk transfer mechanism of infectious disease insurance in China. This paper is informative in understanding the role of insurance in the risk transfer of infectious diseases.

Pandemic risks, such as Covid-19, are difficult to insure as they are characterized by multiple factor risks and losses and involve different types of businesses and people simultaneously. The scarcity of time series and statistical data prevents insurers from developing correct pricing. We propose a model of catastrophe risk with Non-Damage Business Interruption (NDBI) policies to manage the pandemic risk due to the spread of Covid-19. The model employs a Monte Carlo simulation of different lockdown scenarios: the frequency and severity distributions of losses of Italian SMEs. The main results show the importance of a Covid-19 lockdown exposure NDBI policy, which benefits not only SMEs but also the insurer.

This report addresses the large flood exposures of Central Europe and proposes efficient financial and risk transfer mechanisms to mitigate fiscal losses from natural catastrophes. In particular, the Visegrad countries (V-4) of Central Europe, namely, Poland, the Czech Republic, Hungary, and the Slovak Republic, have such tremendous potential flood damages that reliance on budgetary appropriations or even European Union (EU) funds in such circumstances becomes ineffective and does not provide needed cash funds for the quick response and recovery needed to minimize economic disruptions. The report is primarily addressed to the governments of the region, which should build into their fiscal planning the necessary contingent funding mechanisms, based on their exposures. The report is addressed to finance ministries and also to the insurance and securities regulators and the private insurance and capital markets, which may all play a role in the proposed mechanisms. An arrangement using a multi-country pool with a hazard-triggered insurance payout mechanism complemented by contingent financing is proposed, to better manage these risks and avoid major fiscal volatility and disruption.

Natural and man made disasters cause severe human, physical and economic damage, both for the economy and for the population. There is a widespread perception that property insurance is the most efficient and economical way to protect against financial losses caused by natural disasters. Regardless of this fact, in many countries in the world, insurance against natural disasters is poorly developed, both on the supply side and on the demand side. The analysed trends in the coverage of damage from catastrophic risks on a global level in the period from 2000 to 2016 show that on average only 28.8% of the total damages were covered. Effective strategies for financing catastrophic risks must be tailored to the needs and capabilities of each country. For these reasons, the paper analyses various world experiences, taking into account countries with different degrees of development and systems (Australia, Austria, the UK, the Caribbean, China, Romania, Russia, the USA, Spain, France, Turkey and Romania). A special survey was conducted in North Macedonia, which was taken as a case study. The conclusions suggest that the insurance of catastrophic risks should be organized as compulsory insurance for households in urban areas. Regarding the risks, we consider that compulsory insurance should cover earthquake and flood, although at the individual level the consequences of the flood affect a relatively smaller population coverage. Making a legally binding solution must be well thought out in the segment of law enforcement. Regarding the operational aspects of implementing a legally binding solution, the principles of insurance should be used, and the world practice indicates that it is possible only with the involvement of the insurance companies.

This paper analyzes the scope of the private market for pandemic insurance. We develop a framework that explains theoretically how the equilibrium price of pandemic insurance depends on accumulation risk, covariance between pandemic claims and other claims, and covariance between pandemic claims and the stock market performance. Using the natural catastrophe (NatCat) insurance market as a laboratory, we estimate the relationship between the insurance price markup and the tail characteristics of the loss distribution. Then, by using the high‐frequency data tracking the economic impact of the COVID‐19 pandemic in the United States, we calibrate the loss distribution of a hypothetical insurance contract designed to alleviate the impact of the pandemic on small businesses. The pandemic insurance contract price markup corresponds to the top 20% markup observed in the NatCat insurance market. Then we analyze an intertemporal risk‐sharing scheme that can reduce the expected shortfall of the loss distribution by 50%.

PurposeCatastrophe (CAT) events associated with natural catastrophes and man-made disasters cause profound impacts on the insurance industry. This research thus reviews the impact of CAT risk on the insurance industry and how traditional reinsurance and securitized risk-transfer instruments are used for managing CAT risk.Design/methodology/approachThis research reviews the impact of CAT risk on the insurance industry and how traditional reinsurance and securitized risk-transfer instruments are used for managing CAT risk. Apart from many negative influences, CAT events can increase the net revenue of the insurance industry around CAT events and improve insurance demand over the post-CAT periods. The underwriting cycle of reinsurance causes inefficiencies in transferring CAT risks. Securitized risk-transfer instruments resolve some inefficiencies of the reinsurance market, but are subject to moral hazard, basis risk, credit risk, regulatory uncertainty, etc. The authors introduce some popular securitized solutions and use Merton's structural framework to demonstrate how to value these CAT-linked securities. The hybrid solutions by combining reinsurance with securitized CAT instruments are expected to offer promising applications for CAT risk management.FindingsThe authors introduce some popular securitized solutions and use Merton's structural framework to demonstrate how to value these CAT-linked securities. The hybrid solutions by combining reinsurance with securitized CAT instruments are expected to offer promising applications for CAT risk management.Originality/valueThis research reviews a broad array of impacts of CAT risks on the (re)insurance industry. CAT events challenge (re)insurance capacity and influence insurers' supply decisions and reconstruction costs in the aftermath of catastrophes. While losses from natural catastrophes are the primary threat to property–casualty insurers, the mortality risk posed by influenza pandemics is a leading CAT risk for life insurers. At the same time, natural catastrophes and man-made disasters cause distinct impacts on (re)insures. Man-made disasters can increase the correlation between insurance stocks and the overall market, and natural catastrophes reduce the above correlation. It should be noted that huge CAT losses can also improve (re)insurance demand during the postevent period and thus bring long-term effects to the (re)insurance industry.

As an interface between sea and land, ports are exposed to a wide range of natural hazards such as cyclones, floods and tsunami. At the same time, marine cargoes are growing both in terms of volume and value. Besides their exposure to various hazards during the sea trip, their concentration in ports increases the risk to the cargo itself as well as to the port. The objective of this paper is twofold. First, our study proposes a framework for catastrophe risk analysis of marine cargoes and ports by breaking-down the terminal operation process. This allows a more in-depth analysis by investigating the different parts of that process. Second, the study formulates a State Transition model for the simulation of scenarios. This is an integrated and robust risk model, to analyse exposure of marine cargoes and ports to natural hazards. The port of Laem Chabang is chosen as an example for demonstrating the risk simulation analysis. Findings show that losses can be in the form of both physical loss/damage and interruption loss with extensive cargo accumulation due to port disruptions.

Catastrophe risk governance has become one of the key issues affecting global sustainable development. As great changes have taken place in the global social ecosystem, the degree of interconnection between different regions in today’s society is much greater than ever before. Various types of contact networks, e.g., the production chain and supply chain, have been created, which provide diversified channels for the spread of catastrophe risk across time and space. In the context of interconnection, this paper first analyzes the drastic changes of the current disaster risk system. Severe catastrophe risk has posed a great threat to the highly growing international trade, and has also tested the capabilities of national comprehensive disaster defense. Thus, this paper analyzes the main characteristics of China’s comprehensive disaster defense capability, including physical, social, and humanistic defense capability. Finally, this paper puts forward the key points to resolve catastrophe risk from the perspective of decision-makers, including improving the decision-makers’ ability to study and judge the catastrophe chain and the impact of catastrophe, and the national resource reserve capacity to cope with the catastrophe.

An exposure dataset is one of the critical components of catastrophe risk modelling. It can also be one of the most difficult to create. When small numbers of buildings are involved, less than a thousand or so, it may be practicable to view each building and to acquire all the necessary attributes with a reasonable level of confidence. For regional or national-scale projects, however, the task is next to impossible. Ideally, for each building within the modelling areas we would know the location and value, and have enough structural information to underpin the assignment of vulnerability functions for each of several hazards. Such a dataset does not exist in the Pacific region, though various exposure databases have been developed in the past couple of decades. Instead, we have developed a systematic approach to populate and maintain a somewhat less rigorous, but practicable, exposure dataset for use in catastrophe risk modelling. In this paper, a brief review of previous development of exposure databases in the Pacific region is presented, followed by an overview of each class of available data that is used to develop the exposure dataset. Next, the methodologies adopted are illustrated, and application to a test case in Tanna Island, Vanuatu is described. Finally, the proposed exposure dataset development is discussed.

Nat Cat risks are not insurable by traditional insurance mainly because of producing highly correlated losses. The source of such correlation among buildings of a region subject to a natural hazard is discussed. A decomposition method is proposed to split Nat Cat risk into idiosyncratic (and hence insurable) risk and systematic risk (carrying the correlated part). It is explained that the systematic risk can be transferred to capital markets using a set of parametric CAT bonds. Premium calculation is presented for insuring the decomposed risk. Portfolio risk-return trade-off measures for investing on the parametric CAT bond are derived. Multi-regional and multi-hazard parametric CAT bonds are introduced to reduce the risk of the investment. The methodology is applied on a region with about 3000 residential buildings subject to flood hazards.