Risk Financing Strategies Research Articles

Analysis of strengthening disaster risk financing within the framework of disaster management policy in Indonesia

This research analyzes disaster risk financing within the framework of the disaster management policy in Indonesia as the implementation of the Disaster Management Law, Number 24 of 2007, by examining recent issues, challenges, and opportunities in disaster financing. Utilizing a qualitative approach, the research systematically reviews various studies, reports, and existing regulations and policies to understand the current landscape comprehensively. Recent developments in disaster risk financing in Indonesia highlight the need for a nuanced exploration of the existing policy framework. Fiscal constraints, evolving risk landscapes, and the increasing frequency of disasters underscore the urgency of effective disaster risk financing strategies. Through a qualitative examination, this study identifies challenges while illuminating opportunities for innovation and improvement within the current policy framework. The contribution of this research extends to both theoretical and practical levels. Theoretically, it enriches the academic discourse on disaster risk financing by offering a nuanced understanding of the complexities involved. On a practical level, the findings derived from the examination provide actionable recommendations for policymakers and practitioners engaged in disaster management in Indonesia. The insights aim to inform the refinement of disaster management policies and practices, fostering resilience and adaptability in the face of evolving disaster scenarios.

Enhancing Disaster Resilience: Insights from the Cianjur Earthquake to Improve Indonesia’s Risk Financing Strategies

Earthquakes pose a growing threat to Indonesia, and the country’s limited resources for risk mitigation propagate its vulnerability. The heavy reliance on ad-hoc government relief for risk transfer is not sustainable. This study aims to provide scientific evidence for formulating disaster risk financing strategies in Indonesia, focusing on active fault areas with high population density. By analyzing people’s responses to risk financing after the November 21, 2022, earthquake in Cianjur Regency, the study examines emotional reactions, risk perceptions, and willingness to participate in risk insurance. The findings highlight three major issues: low participation in insurance programs due to limited insurance literacy and enrollment, the significant financial burden on the government from material losses, and the critical need for disaster insurance schemes for homes and fixed assets. The study emphasizes the urgency of implementing disaster risk financing in Indonesia, with a focus on the vulnerability of poor and low-income households. It also stresses the importance of enhancing disaster risk governance and promoting public-private partnerships on small-scale insurance schemes.

A Call for Inclusive Disaster Risk Financing in Indonesia: Addressing Vulnerabilities in High-Risk Areas

Earthquakes are a growing threat to Indonesia, with limited resources for risk mitigation. The current reliance on government relief is unsustainable. Despite Law No. 24/2007 on Disaster Management, inclusive disaster risk financing schemes have yet to be established. This study aims to provide evidence for disaster risk financing strategies in Indonesia, focusing on geological disasters in active fault areas with high population density. Aligned with the Sendai Framework for Disaster Risk Reduction (SFDRR) Priority 2, this study seeks to address the financial impact of disasters on governments and societies. By analyzing responses to risk financing following the November 21, 2022 earthquake in Cianjur Regency, this study examines emotional reactions, risk perceptions, and willingness to participate in risk insurance. The findings highlight low participation in insurance programs due to limited insurance literacy and low enrollment in micro earthquake insurance. Material losses from the Cianjur earthquake impose a significant financial burden on the government. There is a critical need for disaster insurance schemes, especially for homes and fixed assets at high risk of land loss due to landslides. Willingness to participate varies among different socioeconomic backgrounds. This article emphasizes the urgency of implementing disaster risk financing in Indonesia, with a focus on the vulnerability of poor and low-income households.

A New Secure Crowdfunding Transaction Scheme Based on Blockchain

Online crowdfunding, an innovative model based on “[Formula: see text]”, is a hot spot for financing via Internet. Crowdfunding based on blockchain is an emerging economic phenomenon and becomes one of the most advanced risk financing strategies. However, crowdfunding transactions face security threats due to identity leaks, quantum attacks and the untraceable nature of blind signatures, which facilitate criminal activity. Different from the previous works, which ignored the importance of traceability, in this paper, we establish a blockchain-empowered secure crowdfunding architecture and propose an anti-quantum partially blind signature algorithm based on the verifiable identity of both sides. Specially, for one thing, the private key decided by user identity is generated by lattice-based sample matrix, and the privacy of user identity can be ensured and traced by the rejection sampling theorem. For another thing, we design an improved krill herd algorithm (IKHA) to increase the credit factor of fundraisers for dealing with project investment issues. The simulation evaluates the correctness and effectiveness of our theoretical analyses. Compared with the current popular schemes, the proposed IKH algorithm has a higher convergence speed and can optimize investment efficiency.

Introducing proactive sovereign disaster risk financing in India: Potentials and challenges

This study explores the possibilities and challenges of introducing ex-ante or proactive disaster risk financing (DRF) solutions such as mitigation funds, credit arrangements, risk transfer instruments for enhancing disaster resilience at the national and sub-national levels in India. A survey using a structured questionnaire was undertaken considering a select group of respondents directly involved in the development and execution of various disaster risk reduction (DRR) and risk financing strategies. The respondents were from the government and non-government entities, identified as key stakeholders with the assumption that the views obtained reflect the disaster-related funding needs of the government and supporting organizations, respectively. The identification of a set of enabling factors is based on the aggregation and systematic analysis of responses. The study, in doing so, offers an insight on the understanding of the respondents on DRF, the existing gaps and scope in disaster prevention and management policies, their limitations and implementation challenges. The analysis generates important policy recommendations for governments at different levels in India that could foster the initiatives towards building disaster resilience. The study argues in favour of a demand for developing a mix of both ex-ante and ex-post disaster financing measures in India rather than relying only on the latter. A diversified approach may safeguard the human and economic assets, control short and long-term fiscal consequences and minimize overall developmental losses due to disasters.

Evaluating reimbursement of integrated support services using chronic care management (CCM) codes for treatment of hepatitis C among Medicare beneficiaries.

The New York City Department of Health and Mental Hygiene (DOHMH) implemented Project INSPIRE, an integrated model of hepatitis C care coordination and telementoring services, from 2014 to 2017. We evaluated the use of chronic care management (CCM) codes to sustain the intervention. DOHMH data were collected as part of a Healthcare Innovation Award from the Centers for Medicare & Medicaid Services (CMS). A retrospective cohort medical billing study was conducted by assigning INSPIRE activities to procedure codes in both facility and nonfacility settings. Rates for procedures were extracted from the CMS's 2018 fee schedules and added across the eligibility periods for Medicare enrollees. Reimbursement was adjusted on the basis of expected patient attrition and compared to costs. The minimum number needed to treat (NNT) to break even was calculated in each setting. Facility reimbursement was higher than costs, whereas nonfacility reimbursement was lower (both P < .01). The NNT was 23 patients in facilities and 33 patients in nonfacilities; 24 patients per care coordinator were treated annually in INSPIRE. CCM fees alone were insufficient to fully reimburse the costs in either setting. Implementation of an appropriate risk financing strategy is necessary to mitigate financial shortfalls when providing CCM services in facility settings.

Evaluating the Public Financing for Florida's Wind Risk

AbstractTo increase residential property insurance options for wind‐related disaster events, the State of Florida created the Citizens Property Insurance Corporation (Citizens) and the Florida Hurricane Catastrophe Fund. These entities play a major role in financing disaster losses for Florida. In this policy article, the authors assert that the State of Florida has emphasized the political objective of insurance affordability rather than managing and controlling risk for the benefit of the citizens of the state. The burden for financing catastrophic hurricane losses has been transferred to the public as most property and casualty insurance policies in Florida are assessable. Florida plays an inherent leadership role in the disaster risk arena, given its high exposure as well as its deep insurance penetration. The authors assert that while Florida has taken a leadership role in disaster risk control, the state's disaster risk financing strategy has failed to employ a long‐term focus that recognizes the interconnectedness of all parts of the system. The opportunity for the state going forward is to change its public policy focus to one that emphasizes availability over affordability. Florida's private markets could operate more competitively, and thus not unnecessarily place Florida's citizens and their economy at risk.

Financial Management of Flood Risks

Disasters present a broad range of human, social, financial, economic and environmental impacts, with potentially long-lasting, multi-generational effects. The financial management of these impacts is a key challenge for individuals and governments in developed and developing countries. G20 Finance Ministers and Central Bank Governors and APEC Finance Ministers have recognised the importance and priority of disaster risk management strategies and, in particular, disaster risk assessment and risk financing. The OECD has supported the development of strategies for the financial management of natural and man-made disaster risks, under the guidance of the OECD High-Level Advisory Board on Financial Management of Large-scale Catastrophes and the OECD Insurance and Private Pensions Committee. This work has included the elaboration of an OECD Recommendation on Good Practices for Mitigating and Financing Catastrophic Risks and a draft Recommendation on Disaster Risk Financing Strategies; The Financial Management of Flood Risk extends this work by applying the lessons from the OECD's analysis of disaster risk financing practices and the development of its guidance to the specific case of floods.This title belongs to OECD Report SeriesISBN: 9781780408569 (Print)ISBN: 9781780408576 (eBook)

Promoting Better Understanding on Sustainable Disaster Risk Management Strategies

Over the past 20 years, natural disaster losses have been steadily climbing in both advanced and developing countries. Disaster-related economic losses exceeded US$400 bn in 2011 worldwide, the highest ever recorded in history. The Great East Japan Earthquake alone resulted in more than US$210 bn in damages. Insured losses of over US$55 bn (out of US$177 bn total natural disaster losses) made 2012 the third most expensive year on record for the insurance industry. The upward trend in natural disaster losses is exacerbated by growing urbanisation, environmental degradation and expected increases in the frequency and severity of hydro-meteorological events. Developing countries are particularly vulnerable, as their regulatory systems often cannot keep pace with the rapidly growing asset bases at risk and do not have adequate resources to dedicate to reducing exposure or to effectively respond to an emergency. There is an urgent need for governments to better understand, manage and reduce the financial and fiscal impacts of natural disasters. Many governments are increasingly recognising the need for comprehensive disaster risk management strategies, including robust disaster risk financing strategies, to achieve sustainable development. In parallel to the increasing attention to disaster risk management, the international community has been working to shift the paradigm of disaster mitigation from response to prevention. The World Bank has developed an integrated, long-term approach to supporting proactive risk reduction and climate change adaptation in developing countries. In 2006, a consortium of governments together with the World Bank established the Global Facility for Disaster Reduction and Recovery (GFDRR) to better channel global support towards mainstreaming disaster risk management integrated into national development planning. The World Bank/GFDRR helps governments institutionalise sustainable and cost-effective disaster risk financing strategies, within the overall disaster risk management framework, to increase financial resilience to natural disasters through four key pillars: sovereign disaster risk financing, property

Asian Public-Private Partnerships: An Overview of Trends and Innovations

The research involves an archival review and analysis of 104 Public-Private Partnership (PPP) projects in Asia to determine general trends in investment, financing, and government support. Representing a total investment of about US$79.37 billion, these projects were implemented over a period of 26 years from 1985 to 2011, covering mainly the transportation, water, and energy sectors. Five major indicators were selected and used for screening the different Asian PPP projects. Plotting these indicators on a pentagram offered a graphical representation of these trends, allowing for a better understanding of the dynamics between risk mitigation measures and financing strategies. Across the different sectors, PPP projects in the transportation sector exhibited the longest cooperation period and received the most government support, ranging from guarantees to direct financing and equity investment. Placing second to transportation projects, energy projects also received substantial government support enabling the implementation of many greenfield projects in Asia. The results also showed a general pattern of greater local ownership across the transportation, energy, and water sectors. A country analysis of the different PPP projects included in the study showed that India provided the most government support, followed by China and the Philippines, respectively.

Insurance against Losses from Natural Disasters in Developing Countries

This paper examines recent experience with insurance and other risk-financing instruments in developing countries, informed by experience in developed countries, to provide insights on the effectiveness of insurance for reducing economic insecurity. Insurance and other risk financing strategies are viewed in the overall context of risk management, including the prevention of losses as well as financing the recovery process through risk pooling and transfer strategies. Specific examples of publicprivate insurance programs for households/businesses, farms and governments are described, including their limitations, especially in light of recent post-Katrina experience in the US. By examining the costs, benefits and risks of public-private risk-financing programs, insights are provided on the effectiveness of insurance as a mechanism for providing economic security to vulnerable communities and governments.

Back to basics—just how much should a risk manager know about risk financing?

Whether directly involved in development and implementation of the organization's risk financing program or not, risk management professionals, at the very least, need to be familiar with and understand the various risk financing strategies available to address all areas of exposure. This article addresses the types of coverages and risk financing options that should be considered when developing a comprehensive risk-financing program, and why it is important for risk management professionals to have some knowledge about these products, in order for their true value to be fully appreciated.

Risk financing in UK local authorities: is there a case for risk pooling?

PurposeSince the early 1990s there has been a growth in local authorities of risk management. However, despite a range of different strategies, initiatives and practices the issue of financing the risks to which authorities are exposed has remained problematic. The traditional dependence on the commercial insurance market has proved to be a flawed strategy. This paper aims to analyse an alternative risk financing strategy which has been successful in local authorities in other countries, that of risk pooling.Design/methodology/approachThe paper analyses the rationale behind risk pools, investigates the legislative environment that appears to make these acceptable to central government and evaluates the likely benefits to local authorities of their adoption.FindingsThe paper finds that the perceived main legislative barrier to risk pools may no longer exist. Given that, there is a strategic, financial and operational case to be made for at least exploring the possibility of risk pooling. The experience from the USA would suggest that pools can have an important role to play in risk financing, and evidence now exists that a number of UK local authorities are actively pursuing pool formation.Practical implicationsThe development of risk pools is likely to result in a significant reduction in the use of conventional insurance by local authorities. The evidence would suggest that this will be beneficial, but this is subject to the proviso that actuarial, financial and managerial practice within pools is rigorous.Originality/valueThis is an under‐researched area, with almost no extant UK‐relevant academic, or indeed practitioner, literature. The paper adds to the understanding of public sector risk management and financing for both academic and practitioner audiences.

Surf's up

The global Internet is rich with resources that provide in-depth information about all aspects of the risk management process. Many theories and practices are shared that can be helpful in analyzing and resolving both pure and speculative uncertainties. Lessons learned can be tailored to both businesses and public sector organizations. In addition to convenience, cybersurfing the Web delivers many viewpoints about risk evaluation criteria and risk management program strategies. Postings include examples of case studies and risk management policy statements. Some sites focus on risk model development, risk audit methodology, risk financing strategies, and risk vulnerability assessment. Techniques are given for integrating risk control into project plans. The author provides an annotated list of Web sites selected for review because they serve as examples of targeted portals and scholarly routes to best practices for business-related risk management.

Integrated Risk Management and the Role of the Risk Manager

ABSTRACT: Although the transferring of a firm's pure risk historically has been conducted through the insurance and reinsurance markets, risk managers of large corporations are reportedly becoming more sophisticated with regard to their risk financing strategies. This increased sophistication has come in the form of greater use of techniques such as captives, finite risk insurance, financial reinsurance, and risk retention groups. The purpose of this study is to assess the characteristics and extent of integrated risk management. Using survey data, we evaluate several aspects of risk management integration, including (1) the extent to which risk managers are involved in managing both pure and financial risks facing their firms, (2) the nonoperational types of risks handled by risk managers and the techniques being used to handle a broader set of risks, and (3) the effect that factors such as the size of the firm, the firm's industry, and the background and training of the risk manager has on participation in integrated risk management activities.