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Global Change, Natural Disasters and Loss-sharing: Issues of Efficiency and Equity

Author

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  • Joanne Linnerooth-Bayer

    (International Institute for Applied Systems Analysis (IIASA), Laxenburg, Austria,)

  • Aniello Amendola

    (Joint Research Centre (JRC-ISIS), Ispra, Italy)

Abstract

Global change in the form of climate warming, demographic developments, land use and capital movements to vulnerable regions will likely contribute to the already increasing human and economic losses from natural disasters. As countries in both the developing and developed world contemplate increasing losses from natural disasters, and as the victims relate these losses to human culpability, questions of burden-sharing for preventing and absorbing human and financial losses are becoming increasingly topical. This paper provides an overview of two forms of state and market burden-sharing at the local and global levels: collective loss-sharing after a major disaster by the state or the international community and the pre-disaster transfer of risk through insurance and other hedging instruments. With the recent attention given to the role of the private sector for apportioning and preventing disaster losses, we examine the efficiency and equity arguments for both collective loss-sharing and private risk transfer. We give special attention to the potential for governments of poor countries to transfer their natural disaster risks to the insurance and reinsurance markets, and to the international capital markets with newly developing hedging instruments, such as catastrophe bonds. We suggest that, under certain conditions, subsidized risk transfer can be an efficient and equitable way for industrialized countries to assume partial responsibility for the increasing disaster losses in poor countries, in addition to their role in aiding the economies of these countries. The Geneva Papers on Risk and Insurance (2000) 25, 203–219. doi:10.1111/1468-0440.00060

Suggested Citation

  • Joanne Linnerooth-Bayer & Aniello Amendola, 2000. "Global Change, Natural Disasters and Loss-sharing: Issues of Efficiency and Equity," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 25(2), pages 203-219, April.
  • Handle: RePEc:pal:gpprii:v:25:y:2000:i:2:p:203-219
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    Cited by:

    1. Sukono & Hafizan Juahir & Riza Andrian Ibrahim & Moch Panji Agung Saputra & Yuyun Hidayat & Igif Gimin Prihanto, 2022. "Application of Compound Poisson Process in Pricing Catastrophe Bonds: A Systematic Literature Review," Mathematics, MDPI, vol. 10(15), pages 1-19, July.
    2. So-Min Cheong, 2011. "The Role of Government in Disaster Management: The Case of the Hebei Spirit Oil Spill Compensation," Environment and Planning C, , vol. 29(6), pages 1073-1086, December.
    3. Riza Andrian Ibrahim & Sukono & Herlina Napitupulu & Rose Irnawaty Ibrahim, 2023. "How to Price Catastrophe Bonds for Sustainable Earthquake Funding? A Systematic Review of the Pricing Framework," Sustainability, MDPI, vol. 15(9), pages 1-19, May.
    4. Karin Hansson & Aron Larsson & Mats Danielson & Love Ekenberg, 2011. "Coping with Complex Environmental and Societal Flood Risk Management Decisions: An Integrated Multi-criteria Framework," Sustainability, MDPI, vol. 3(9), pages 1-24, August.
    5. Anna Vari, 2002. "Public involvement in flood risk management in Hungary," Journal of Risk Research, Taylor & Francis Journals, vol. 5(3), pages 211-224, July.
    6. Independent Evaluation Group, 2006. "Hazards of Nature, Risks to Development : An IEG Evaluation of World Bank Assistance for Natural Disasters," World Bank Publications - Books, The World Bank Group, number 7001.

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