Natural Disaster Insurance Research Articles

The Impact of the WTO Agricultural Agreement on Developing Countries

Abstract: Agricultural insurance, as an agricultural risk management tool to disperse agricultural risks, compensate farmers' losses and safeguard agricultural production, has become an indispensable part of the agricultural security system in various countries. However, due to the high cost of agricultural insurance, many countries provide financial subsidies for agricultural insurance. This paper introduces the help of agricultural insurance subsidies to countries in World Trade Organization (WTO), summarizes the main features and inadequacies of relevant WTO rules, and analyzes the existing problems of agricultural insurance subsidies from four aspects based on the practice of American agricultural insurance subsidies. The main conclusions of this paper include: first, the rules of agricultural insurance subsidy are limited and the classification is not clear, which seriously harms the agricultural development of developing countries; second, income insurance and natural disaster insurance in premium subsidies are regarded as "green box" tools, which need to meet certain conditions, otherwise there is still the possibility of being regarded as "amber box" tools; third, the current WTO rules on agricultural insurance subsidies are more conducive to the development of developed countries, but the agricultural insurance subsidies in developing countries lag behind and are difficult to implement, and the rules on agricultural insurance subsidies urgently need to be improved. Fourth, the double standards of developed countries and developing countries have caused differences in the classification of agricultural insurance subsidies. Finally, the thesis puts forward some suggestions on the compliance development of China's agricultural insurance subsidies under the framework of WTO rules.

Development of the Black–Scholes Model for Determining Insurance Premiums to Mitigate the Risk of Disaster Losses Using the Principles of Mutual Cooperation and Regional Economic Growth

The frequency and economic damage of natural disasters have increased globally over the last two decades due to climate change. This increase has an impact on the disaster insurance field, particularly in the calculation of premiums. Many regions have a shortcoming in employing insurance because the premium is too high compared with their budget allocation. As one of the solutions, the premium calculation can be developed by applying the cross-subsidies mechanism based on economic growth. Therefore, this research aims to develop premium models of natural disaster insurance that uniquely involve two new variables of an insured region: cross-subsidies and the economic growth rate. Another novelty is the development of the Black–Scholes model, considering the two new variables, and it is used to formulate the premium model. Following the modeling process, this study uses the model to estimate the premiums for natural disaster insurance in each province of Indonesia. The estimation results show that all new variables involved in the model novelties significantly affect the premiums. This research can be used by insurance companies to determine the premium of natural disaster insurance, which involves cross-subsidies and economic growth.

Making The Best Investment Strategy for Insurance Companies Under The Background of Extreme Weather

In the face of the negative impacts of the frequent occurrence of extreme weather disasters around the world, we have developed natural disaster risk prediction and analysis models for insurance companies to maximize their benefits. This paper first selects six risk indicators, such as flood, cold wave, drought and other disasters, and combines the analytic hierarchy process (AHP) and grey prediction model (GM) to calculate the impact weights of six kinds of natural disasters, and predicts the probability of future occurrence, so as to realize the comprehensive assessment of natural disaster risk. This paper also analyzes the effect of the owner's intention to buy insurance on the insurance strategy through the function model, and solves the optimal insurance strategy through the technique for order preferenceby similarity to ideal solution (TOPSIS) and neural network. We define the ratio of the total profit of natural disaster insurance to the total cost as the decision coefficient K. When K is greater than 35%, the insurance company chooses to write the policy, and when K is greater than 5% and less than 35%, the insurance company chooses to bear the risk. Finally, this paper collected the data of Florida and Kyushu, Japan. Through the insurance model, it calculated that the total profit of natural disaster insurance in Florida was 635.8 million US dollars, while that in Kyushu was -61.51 million US dollars. Therefore, insurance companies should invest in Florida.

Determination of Mount Eruption Insurance Premiums in Indonesia Based on Collective Risk and Level of Risk Spread

Volcano eruption insurance is an insurance product that provides financial protection to policy holders who experience losses due to volcanic eruptions. This insurance product is still rarely developed in Indonesia, even though this country is very vulnerable to natural disasters. Therefore, this research aims to carry out a simulation of determining volcanic eruption disaster insurance premiums based on collective risk and the level of risk distribution. The data used in this research is the frequency of events and economic losses due to volcanic eruptions. Event frequency and loss data are analyzed using a collective risk model. Apart from that, determining insurance premiums also takes into account loading factors and the level of risk distribution from volcanic eruption disaster data. From the results of the analysis, it was found that natural disaster insurance premiums had increased, along with an increase in the loading factor provided. In addition, insurance premium expenses are influenced by the collective risks faced by customers. The greater the collective risk faced, the greater the insurance premium that customers must bear. Based on the results of the estimates carried out, it is hoped that this research can provide an overview to the Indonesian government in estimating the Mount Meletus insurance scheme. Meanwhile, insurance companies can get an idea of determining insurance premiums according to conditions in the field.

Model for Determining Insurance Premiums Taking into Account the Rate of Economic Growth and Cross-Subsidies in Providing Natural Disaster Management Funds in Indonesia

Natural disasters are increasing due to climate change, which is causing economic losses for countries affected by them. Disaster management funds need to be provided, including through purchasing insurance. Determining natural disaster insurance premiums needs to involve consideration of the geographical conditions of the country. The aim of this research was to develop a model for determining natural disaster insurance premiums using the jumping processes method and a cross-subsidy system. The model takes into account the level of economic growth and the natural disaster potential index. The data analyzed relate to cases of natural disasters and losses that occurred in each province in Indonesia. From the results of the analysis, it was found that through a cross-subsidy system, the principle of mutual cooperation can be applied in managing natural disasters. Regions with a high level of economic growth and a low natural disaster potential index need to provide subsidies to regions with a low economic growth rate and a high natural disaster potential index. It was also found that the cost of insurance premiums was influenced by the size of losses and the frequency of natural disasters in the province. The greater the potential for disasters and economic losses experienced by a province due to disasters, the greater the premium burden that must be borne, and vice versa. Based on these conditions, insurance premiums vary in each province in Indonesia. It is hoped that the results of this research can provide a reference for the government in determining policies for providing funds for natural disaster management using a cross-subsidy system. In addition, this research can provide a reference for insurance companies in determining natural disaster insurance premiums in Indonesia.

Climate protection gap in the EU and the demand for natural catastrophe insurance

Climate protection gap in the EU and the demand for natural catastrophe insurance

The moral economies of natural disasters insurance: solidarity or individual responsibility?

ABSTRACT Over the second half of the twentieth century, the moral economy of insurance has shifted from solidarity and mutual support to individual responsibility. In this context, the French regime for the protection against natural catastrophes that took shape in the 1980s exemplifies a strong and almost anachronical political will to foster solidarity at the national level, thus questioning the moral economy of responsibility. This paper offers a textual analysis of the official debates that led to the launch of the regime. It shows how the representatives chose to separate compensation, financed by equal individual participation, from state prevention. This contrasts with other schemes worldwide that rely on rational decision theory to situate the responsibility for prevention at the individual level. In this alternative, risk-based premiums play a theoretically crucial role in risk signals. In practice, however, they lead to affordability issues while failing to govern prevention as theoretically expected. With the climate crisis exacerbating this phenomenon, the examination of the French regime thus allows to fruitfully revive other moral economies of insurance.

Small area estimation of household expenditure on insurance programs for minimizing the impact of natural disasters in West Java, Indonesia

West Java is one of Indonesia’s Provinces with a high disaster risk index. The Province has experienced earthquakes, volcanic eruptions, tidal waves, droughts, landslides, floods and tsunamis. In the event of a disaster, the government’s budget allocation is used for handling losses due to disasters. Seeing these conditions, it is necessary to carry out disaster risk management efforts to reduce losses by using natural disaster insurance by households. Publication of household insurance expenditures is essential to see the community’s ability to pay insurance for handling losses due to disasters. This study aims to estimate the average household expenditure on insurance and the average total household expenditure by district/city in the West Java Province. The analytical method used is the Small Area Estimation using the Fay-Herriot model with logarithmic transformation. The data source is the National Socio-Economic Survey (SUSENAS) for March 2019. The results show the proportion of insurance expenditure to total household expenditure (ability to pay) was relatively low, ranging from 0.93%–2%. This result is still far from the ability to pay insurance in developing countries, which is 5%. This finding can be used to see the power of households to pay for insurance (ability to pay). The government can take policies related to this to minimize losses due to natural disasters in the West Java Province.

Formulating Natural Disaster Insurance Scheme for Micro, Small, and Medium Enterprises (MSMEs) in Indonesia

The existence of disaster insurance in Indonesia is particularly important for disaster-prone areas. In recent years, only 2.96% of 64 million MSMEs have disaster insurance. This is because the existing disaster insurance scheme has not fully met the expectations of MSMEs regarding its premium value, its claims mechanism and MSMEs financial capability. This research seeks to explore the factors that influence MSMEs to own disaster insurance, by using quantitative analysis of Panel Fixed Effects Model as the first model and Probit Models as the second and third models as well as qualitative analysis. The result will be utilized to formulate the appropriate disaster insurance product which optimize insurance features based on MSMEs’ demand, encourage regulatory support and improve government funding capacity. Indonesia is currently facing approximately IDR19.75 trillion (USD1.4 billion) financing gap to cover the loss caused by disasters hence, there is also a need to create a high- level financing scheme to cover the gap.

Consistency between the subjective and objective flood risk and willingness to purchase natural disaster insurance among farmers: Evidence from rural areas in Southwest China

Floods pose significant threats to farmers, and engaging in effective disaster avoidance behaviors can mitigate some of these risks for farmers in flood risk areas (FRA). However, due to farmers' bounded rationality characteristics, they often have a cognitive bias of blindly overestimating or underestimating flood risk, thus failing to perform correct disaster avoidance behaviors. Based on survey data from 180 farmers in FRA in southwest China, this study constructs an assessment method for farmers' subjective and objective flood risk and analyzes the characteristics of farmers' subjective and objective flood risk. A probit regression model explores the correlation between subjective and objective flood risk consistency and farmers' willingness to purchase natural disaster insurance (WPNDI). Results showed that of the 180 farmers surveyed, 63.89% had inconsistent subjective and objective flood risks, mainly reflected in an underestimation of objective flood risk. Farmers' subjective and objective flood risk consistency was found to be positively and significantly correlated with their WPNDI. When other conditions remain unchanged, for every unit increase in the consistency of farmers' subjective and objective flood risk, their WPNDI increased by 0.601 units on average. This paper originally proposed the hypothesis that the consistency of farmers' subjective and objective flood risk is positively and significantly correlated with their WPNDI, and proved the reliability of this hypothesis through research. These findings can provide policy references for disaster risk management and resilient disaster prevention system construction in FRA.

Problems of Insurance in the Coming Age of Disasters

The existence of disaster insurance in Indonesia is particularly important because the area is prone to disasters, especially for MSMEs.Increasing resistance to hazards from climate change and disasters can benefit greatly from well-designed insurance programs. The insurance system used must be effective and ideal, which is the basis for the thinking in writing this paper. The purpose of this study analyzes the status, types, and evolution of market-based disaster insurance schemes required in Indonesia by considering that natural disaster insurance is extremely important. Indonesia still do not have coverage options. Where insurance coverage does exist, it is frequently enforced by mandated insurance and credit-linked goods, as well as premium subsidies. It is expected from the findings and creations arise from the paper goal to develop a good, efficient, and ideal natural catastrophe insurance system for the people of Indonesia. It is also hoped that this writing would be effectively put into practice in the future, bringing wealth to those who have been affected by natural disasters. As a result, all tiers of Indonesian society can achieve the common goal of the Indonesian people, which is to achieve community welfare and protection.

Insights into the complementarity of natural disaster insurance purchases and risk reduction behavior.

While flooding is the costliest natural disaster risk, public-sector investments provide incomplete protection. Moreover, individuals are in general reluctant to voluntarily invest in measures which limit damage costs from natural disasters. The moral hazard hypothesis argues that insured individuals take fewer other preparedness measures based on their assumption that their losses will be covered anyway. Conversely, the advantageous selection hypothesis argues that individuals view insurance and other risk reduction measures as complements. This study offers a comprehensive assessment of factors related to the separate uptake of natural disaster insurance and the flood-proofing of homes as well as why people may take both of these measures together. We use data from a survey conducted in Paris, France, in 2018, after several flood events, for a representative sample of 2976 residents facing different levels of flood risk. We perform both main effects regressions and interaction analyses to reveal that home adaptation to flooding is positively associated with comprehensive insurance coverage, which includes financial protection against natural disasters. Furthermore, actual and perceived risks, as well as awareness of official information on flood risk, are found to explain some of the relationship between home adaptation and comprehensive insurance purchase. We suggest several recommendations to policymakers based on these insights which aim to address insurance coverage gaps and the failure to take disaster risk reduction measures. In particular, groups in socially vulnerable situations may benefit from subsidized insurance, low interest loans, and decision aids to implement costly adaptation measures.

Fifty Years of U.S. Natural Disaster Insurance Policy

Fifty Years of U.S. Natural Disaster Insurance Policy

The “Environment Making State” and Climate Change: The French “Cat Nat” Reinsurance Scheme Under Strain

AbstractIn 2012, SCOR, one of the world's largest reinsurers, sued the French state, challenging a public–private natural disaster insurance scheme, called the “cat nat” regime. It campaigned in favour of a “real” natural disaster insurance market. The purpose of this paper is to grasp the logic of this litigation. It reveals growing tensions regarding the insurance of natural disasters, against the backdrop of climate change. To make sense of this, we will build on Christian Parenti's theory of the “environment making state”. This approach aims at understanding the interaction between capitalism, states, and nature. The question we will pose is: what happens to “environment making” institutions in times of crisis? Crisis leads to the “politicisation” of “environment making”: decisions concerning the management of natural hazards are increasingly taken by the executive branch. This “politicisation” may represent an important evolution in the relationship between capitalism, states, and nature in the future.

Insurance Premium Determination Model and Innovation for Economic Recovery Due to Natural Disasters in Indonesia

Climate change that occurs causes the risk of natural disasters to continue to increase throughout the world. Economic losses are unavoidable, leading to the need for continuous innovation in post-disaster economic recovery efforts. Insurance is one of the offers in providing funding for the economic recovery that occurs. This study aimed to develop innovations and models for determining natural disaster insurance premiums with a subsidy and tax system. In addition, the developed model considers the disaster risk index in the form of the level of risk distribution, the frequency of events, and economic losses. In this study, the data used were the frequency of events and economic losses obtained from the Indonesian National Disaster Management Agency. The data used were 20 database periods from 2000 to 2019. This study used the collective risk method from the index of natural disaster risk parameters. From the results of the analysis, it was found that the level of distribution of disaster risk affected the determination of insurance premiums. The amount of insurance premiums is increasing along with the increase in the magnitude of the spread of disaster risk. In addition, if taxes and subsidies are reduced, then for high-risk areas, there will be a decrease in the burden of insurance premiums, and for low-risk areas, there will be an increase in the premium burden that must be paid. On the basis of the results of the analysis on the insurance model, it was found that the insurance premiums in each province varied. The results of this study are expected to be a reference for the government and private companies in implementing disaster insurance in Indonesia. In addition, the results of this study can be a means of developing innovations for disaster risk management that occurs.

Identifying the potential participation in natural disaster insurance: first attempt based on a national socio-economic survey in Indonesia

PurposeThis study aims to identify the regions with a high risk of natural disaster, estimate the proportion of households potentially participating in natural disaster insurance and analyze the relationship between disaster risk index and proportion of household potentially participating in natural disaster insurance.Design/methodology/approachDescriptive and quadrant analysis was applied on the 2019 Indonesia Disaster Risk Index (IRBI) scores and the 2019 National Socio-Economic Survey data.FindingsThe results showed there are only two categories of disaster risks in Indonesia based on IRBI categorization: “Medium” and “High.” Some districts in Aceh Province such as Simeuleu, Pidie Jaya and Banda Aceh City were observed to have a high proportion of households potentially participating in the natural disaster insurance while some in Jawa Tengah provinces have fairly low level even though they were categorized as high disaster-prone areas. Moreover, the quadrant analysis showed that 43 districts have high IRBI scores but low insurance participation rates with most discovered to be in Jawa Barat and Sumatera Selatan provinces.Originality/valueIndonesia does not have a financial mitigation program up to the present time because almost all disaster resolutions are formulated based on emergency funds from the state budget even though it is important to use insurance schemes in all stages of disaster management. To the best of the authors’ knowledge, this study is the first attempt to identify households potentially participating in natural disaster insurance through the National Socio-Economic Survey in Indonesia.

Adaptation and Adverse Selection in Markets for Natural Disaster Insurance

This paper quantifies frictions in uptake, tests for adverse selection, and analyzes welfare effects of proposed reforms in natural disaster insurance markets. I find that willingness to pay is remarkably low. In high-risk flood zones, fewer than 60 percent of homeowners purchase flood insurance even though premiums are only two-thirds of own costs. Estimating flood insurance demand and cost elasticities using house-level variation in premiums from recent US congressional reforms reveals that these homeowners select into insurance based on observable differences in adaptation but not private information about risk. These findings change the sign of predicted welfare effects of proposed policies. (JEL D82, G22, Q54)

ASSESSMENT OF TCIP COMPULSORY EARTHQUAKE INSURANCE EVALUATIONS BY LOSS ADJUSTERS UNDER FUZZY LOGIC

Due to the geological, topographic and climatic characteristics of Turkey, natural disasters are frequently experienced. 96% of Turkey is in an earthquake zone with different degrees of danger zones. This situation clearly reveals the importance of having TCIP (Turkish Natural Catastrophe Insurance Pool) earthquake insurance in Turkey. Earthquake insurance certificate is an assurance that financial losses are compensated immediately after an earthquake. In the study, 53 number of experts (DM) working in the insurance sector and experts in TCIP insurance, earthquake & buildings’ structural mechanics, who are managers, engineers, insurance experts and instructors in public and private sectors, were interviewed. Criteria and sub-criteria of the study are formed as a result of the interviews and the established criteria and related sub-criteria (21 main criteria/75 sub-criteria) are evaluated. In the study, fuzzy multi-objective mathematical model (FMOM: by using Fuzzy AHP (Analytical Hierarchy Process), Fuzzy TOPSIS and Fuzzy VIKOR methods) are used to evaluate/calculate the damages within the scope of TCIP insurance after the earthquake by insurance experts. "Post-earthquake damage assessment form" is formed by using multi-criteria decision making (MCDM) method which is Fuzzy AHP (Analytical Hierarchy Process), Fuzzy TOPSIS and Fuzzy VIKOR methods. In the study, the criteria were weighted by using Fuzzy AHP method and among the criteria, “Building’s Structural System Type” which has the highest importance weight value, therefore it was the most important criterion. The second criterion is “Status of Column Damages/Fractures”, the third criterion is “The Intensity of the Earthquake”. By using Fuzzy TOPSIS and Fuzzy VIKOR methods, 5 number of insurance experts who evaluate/make TCIP insurance are evaluated and the most suitable/experienced insurance expert is selected.

Insurance as an Alternative for Sustainable Economic Recovery after Natural Disasters: A Systematic Literature Review

The risk of natural disasters has increased over the last few decades, leading to significant economic losses across the globe. In response, research related to the risk of economic loss due to natural disasters has continued to develop. At present, insurance remains the best solution for funding such losses. The purpose of this study is to analyse the development of insurance as an alternative for sustainable economic recovery after natural disasters. The data used are articles obtained from several sources indexed by Scopus and Google Scholar. The search resulted in a final database of 266 articles, culled from a total of 813 articles before the final selection was made. The articles used are publications from 2000–2021 (including 21 database periods), to which we applied a systematic literature review method. Identification and evaluation of the articles was carried out through visualization of their content, development of disaster risk insurance, and availability of disaster risk insurance by country and type. The identification results show that the relationship between the word “insurance”, according to visualization using the VOSviewer software, has a relationship with other clusters including the words “disaster”, “disaster insurance”, “risk”, “natural disaster”, “study”, “recovery”, and “disaster risk financing”. The 266 articles studied show that there was an annual increase in the number of published scientific papers over the period 2000–2021. The types of disaster risk insurance, based on a review of the articles, include agricultural insurance, flood insurance, property insurance, earthquake insurance, crop insurance, and natural disaster insurance. In addition, of the six types of disaster risk insurance, three have been discussed the most in the last five years, namely, agricultural, flood, and property insurance. The increase in the number of scientific publications discussing these three types of disaster risk insurance has been influenced by climate change. Climate change causes a significant increase in the potential for disasters and is accompanied by an increased risk of loss. This review is expected to provide information and motivation for researchers related to the development and importance of disaster risk insurance research. Research in the risk sector for disaster losses due to climate change should be continued in the future in order to help fund economic recovery, especially throughout the insurance sector. With continuous research on disaster risk insurance, it is hoped that the resulting information can be more effective in determining insurance risk and in helping local economies and communities recover after the advent of a disaster. With the availability of funds for post-disaster recovery, the regional economy affected by the disaster can be immediately restored and recovered from adversity.

Factors Affecting the Intention to Participate in Disaster Risk Insurance of Households in the North and North Central of Vietnam

The research was conducted with the aim to identify the factors affecting the intention to purchase disaster risk insurance in the North and North Central region of Vietnam.The study used quantitative methods, selected TPB model to conduct research with data collected from 291 subjects, the results showed that the attitude towards disaster risk insurance, subjective norm, perceived behavioral control has a positive influence on the central factor, which is intended. From the results of the analysis, the study gives recommendations for the government and businesses to improve services. Additionally, the research will provide a basis for raising awareness about participating in disaster risk insurance products to proactively protect lives, livelihoods, infrastructure, and homes from the impacts of natural disasters. Keywords: natural disaster insurance, disaster risk insurance, purchase intention. DOI: 10.7176/JESD/13-8-07 Publication date: April 30 th 2022