IDEAS home Printed from https://ideas.repec.org/a/spr/nathaz/v64y2012i2p1391-1403.html
   My bibliography  Save this article

A novel strategy to determine the insurance and risk control plan for natural disaster risk management

Author

Listed:
  • Cheng-Wu Chen
  • Chun-Pin Tseng
  • Wen-Ko Hsu
  • Wei-Ling Chiang

Abstract

This study presents an extended framework for the analysis of economic effects of natural disaster risk management. It also attempts to define and evaluate the optimal insurance arrangements. A model, the economic utility constrained-maximization model, is proposed. The purpose of this study is to establish a strategy for determining an insurance and risk control plan in which consideration is given to balancing the economic effects (e.g., decrease in costs due to damage) by disaster mitigation. Furthermore, these values are compared with risk control actions for purposes of prioritization, to provide data to help evaluate the benefit of each risk control action. Disaster insurance policy premiums in contrast are based on actuarial data taken from situations in which risk control measures are not employed. This can make such contracts unfair to responsible enterprise managers who must take risk control measures. This represents an unfair aspect of insurance policies. Enterprise managers should be able to determine the optimum arrangement between natural disaster risk control and insurance given their budget limitations. The optimal strategies aim at the best applicability and balance between risk control and insurance capability for the enterprise manager. Risk control measures can generate several risk control options for enterprise managers. Premium discounts by insurers are given in this model. Copyright Springer Science+Business Media B.V. 2012

Suggested Citation

  • Cheng-Wu Chen & Chun-Pin Tseng & Wen-Ko Hsu & Wei-Ling Chiang, 2012. "A novel strategy to determine the insurance and risk control plan for natural disaster risk management," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 64(2), pages 1391-1403, November.
    • Handle: RePEc:spr:nathaz:v:64:y:2012:i:2:p:1391-1403
    DOI: 10.1007/s11069-012-0305-3
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11069-012-0305-3
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11069-012-0305-3?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Chen, C.W. & Chiang, W.L. & Hsiao, F.H., 2004. "Stability analysis of T–S fuzzy models for nonlinear multiple time-delay interconnected systems," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 66(6), pages 523-537.
    2. Choong-Sung Yi & Jin-Hee Lee & Myung-Pil Shim, 2010. "GIS-based distributed technique for assessing economic loss from flood damage: pre-feasibility study for the Anyang Stream Basin in Korea," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 55(2), pages 251-272, November.
    3. Chun-Pin Tseng & Cheng-Wu Chen & Yu-Ping Tu, 2011. "A new viewpoint on risk control decision models for natural disasters," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 59(3), pages 1715-1733, December.
    4. Hongjian Zhou & Jing’ai Wang & Jinhong Wan & Huicong Jia, 2010. "Resilience to natural hazards: a geographic perspective," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 53(1), pages 21-41, April.
    5. Wen-Ko Hsu & Chun-Pin Tseng & Wei-Ling Chiang & Cheng-Wu Chen, 2012. "Risk and uncertainty analysis in the planning stages of a risk decision-making process," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 61(3), pages 1355-1365, April.
    6. Wen-Ko Hsu & Pei-Chiung Huang & Ching-Cheng Chang & Cheng-Wu Chen & Dung-Moung Hung & Wei-Ling Chiang, 2011. "An integrated flood risk assessment model for property insurance industry in Taiwan," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 58(3), pages 1295-1309, September.
    7. Han-Chung Yang & Cheng-Wu Chen, 2012. "Potential hazard analysis from the viewpoint of flow measurement in large open-channel junctions," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 61(2), pages 803-813, March.
    8. Bih-Yaw Shih & Chen-Yuan Chen & Chung-Wei Chen & I Hsin, 2012. "Using Lego NXT to explore scientific literacy in disaster prevention and rescue systems," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 64(1), pages 153-171, October.
    9. Raviv, Artur, 1979. "The Design of an Optimal Insurance Policy," American Economic Review, American Economic Association, vol. 69(1), pages 84-96, March.
    10. C. Haque & David Etkin, 2007. "People and community as constituent parts of hazards: the significance of societal dimensions in hazards analysis," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 41(2), pages 271-282, May.
    11. Edward Simpson Prescott, 1999. "A primer on moral-hazard models," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 47-78.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Md. Islam & Md. Malak & M. Islam, 2013. "Community-based disaster risk and vulnerability models of a coastal municipality in Bangladesh," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 69(3), pages 2083-2103, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cheng-Wu Chen & Ching-Chung Lee & Chun-Pin Tseng & Chia-Hung Chen, 2013. "Application of GIS for the determination of hazard hotspots after direct transportation linkages between Taiwan and China," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 66(2), pages 191-228, March.
    2. Cheng-Wu Chen & Kevin Liu & Meng-Lung Lin & Chun-Pin Tseng, 2013. "A new viewpoint of hazard assessment and management for Taiwan’s insurance issues," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 65(1), pages 303-314, January.
    3. Cheng-Wu Chen & Ching-Chung Lee & Chia-Hung Chen & Chun-Pin Tseng, 2013. "The integration of nautical hazard assessment and harbor GIS models to the Taichung Port area in Taiwan," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 67(2), pages 275-294, June.
    4. Cheng-Wu Chen & Kevin Liu & Chun-Pin Tseng & Wen-Ko Hsu & Wei-Ling Chiang, 2012. "Hazard management and risk design by optimal statistical analysis," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 64(2), pages 1707-1716, November.
    5. Wen-Ko Hsu & Wei-Ling Chiang & Qiang Xue & Dung-Mou Hung & Pei-Chun Huang & Cheng-Wu Chen & Chung-Hung Tsai, 2013. "A probabilistic approach for earthquake risk assessment based on an engineering insurance portfolio," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 65(3), pages 1559-1571, February.
    6. Wen-Ko Hsu & Wei-Ling Chiang & Cheng-Wu Chen, 2013. "Earthquake risk assessment and optimal risk management strategies for Hi-Tech Fabs in Taiwan," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 65(3), pages 2063-2076, February.
    7. Chih-Wei Lin & Cheng-Wu Chen & Wen-Ko Hsu & Chia-Yen Chen & Chung-Hung Tsai & Yi-Ping Hung & Wei-Ling Chiang, 2013. "Application of a feature-based approach to debris flow detection by numerical simulation," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 67(2), pages 783-796, June.
    8. Chun-Pin Tseng & Cheng-Wu Chen, 2012. "Natural disaster management mechanisms for probabilistic earthquake loss," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 60(3), pages 1055-1063, February.
    9. C. Chen & T. Chen & Y. Chen & S. Yu & P. Chung, 2013. "Storm surge prediction with management information systems: A case study of estimating value and observations system," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 66(2), pages 1009-1027, March.
    10. Wen-Ko Hsu & Chun-Pin Tseng & Wei-Ling Chiang & Cheng-Wu Chen, 2012. "Risk and uncertainty analysis in the planning stages of a risk decision-making process," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 61(3), pages 1355-1365, April.
    11. Chi-Wei Lin & Yi-Ping Hung & Wen-Ko Hsu & Wei-Ling Chiang & Cheng-Wu Chen, 2013. "The construction of a high-resolution visual monitoring for hazard analysis," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 65(3), pages 1285-1292, February.
    12. Bih-Yaw Shih & Chin-Jui Chang & Ying-Hsiu Chen & Chen-Yuan Chen & Yau-Dong Liang, 2012. "Lego NXT information on test dimensionality using Kolb’s innovative learning cycle," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 64(2), pages 1527-1548, November.
    13. Chun-Pin Tseng & Cheng-Wu Chen & Yu-Ping Tu, 2011. "A new viewpoint on risk control decision models for natural disasters," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 59(3), pages 1715-1733, December.
    14. Jeng-Wen Lin & Cheng-Wu Chen & Cheng-Yi Peng, 2012. "Potential hazard analysis and risk assessment of debris flow by fuzzy modeling," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 64(1), pages 273-282, October.
    15. Muhammad Farooq & Muhammad Shafique & Muhammad Shahzad Khattak, 2019. "Flood hazard assessment and mapping of River Swat using HEC-RAS 2D model and high-resolution 12-m TanDEM-X DEM (WorldDEM)," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 97(2), pages 477-492, June.
    16. Cheng-Wu Chen & Chun-Pin Tseng, 2012. "Default risk-based probabilistic decision model for risk management and control," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 63(2), pages 659-671, September.
    17. Yongdeng Lei & Jing’ai Wang & Yaojie Yue & Hongjian Zhou & Weixia Yin, 2014. "Rethinking the relationships of vulnerability, resilience, and adaptation from a disaster risk perspective," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 70(1), pages 609-627, January.
    18. Boonen, Tim J. & Liu, Fangda, 2022. "Insurance with heterogeneous preferences," Journal of Mathematical Economics, Elsevier, vol. 102(C).
    19. Jones, Lindsey & d'Errico, Marco, 2019. "Whose resilience matters? Like-for-like comparison of objective and subjective evaluations of resilience," World Development, Elsevier, vol. 124(C), pages 1-1.
    20. Massimiliano Amarante & Mario Ghossoub & Edmund Phelps, 2012. "Contracting for Innovation under Knightian Uncertainty," Cahiers de recherche 18-2012, Centre interuniversitaire de recherche en économie quantitative, CIREQ.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:nathaz:v:64:y:2012:i:2:p:1391-1403. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.