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Defining the Roles of the Public and Private Sector in Risk Communication, Risk Reduction, and Risk Transfer

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  • Kousky, Carolyn

    (Resources for the Future)

  • Kunreuther, Howard

Abstract

Insurance is an essential component of household and community resilience: it protects insureds financially against disaster losses, can encourage investments in cost-effective mitigation measures through premium reductions, and facilitates rebuilding of property and long-term recovery following a disaster via claim payments. Private insurers face challenges in providing protection against low probability, high-consequence events, however, and the perceived market failures have led governments around the world to create various (quasi to fully) public insurance entities, often designed as public–private partnerships. This paper synthesizes findings from six papers and the resulting discussion at a November 2016 workshop, “Improving Disaster Financing: Evaluating Policy Interventions in Disaster Insurance Markets.” Participants evaluated disaster insurance programs for flood, earthquake, and terrorism losses, as well as comprehensive homeowners policies. This paper discusses the difficulties in providing protection against these types of disasters and suggests ways to improve public-private partnerships for disaster financing in three interrelated areas: (1) risk communication, (2) risk reduction, and (3) risk transfer. The paper concludes with a proposal for a comprehensive insurance program that could harness the benefits of both the public and private sectors.

Suggested Citation

  • Kousky, Carolyn & Kunreuther, Howard, 2017. "Defining the Roles of the Public and Private Sector in Risk Communication, Risk Reduction, and Risk Transfer," RFF Working Paper Series 17-09, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-17-09
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    File URL: https://www.rff.org/documents/1770/RFF-DP-17-09.pdf
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    References listed on IDEAS

    as
    1. Hogarth, Robin M & Kunreuther, Howard, 1985. "Ambiguity and Insurance Decisions," American Economic Review, American Economic Association, vol. 75(2), pages 386-390, May.
    2. Austin Troy & Jeff Romm, 2004. "Assessing the price effects of flood hazard disclosure under the California natural hazard disclosure law (AB 1195)," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 47(1), pages 137-162.
    3. Carolyn Kousky & Roger Cooke, 2012. "Explaining the Failure to Insure Catastrophic Risks," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 37(2), pages 206-227, April.
    4. Carolyn Kousky & Leonard Shabman, 2017. "Policy Nook: “Federal Funding for Flood Risk Reduction in the US: Pre- or Post-Disaster?”," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 3(01), pages 1-11, January.
    5. Erwann Michel‐Kerjan & Sabine Lemoyne de Forges & Howard Kunreuther, 2012. "Policy Tenure Under the U.S. National Flood Insurance Program (NFIP)," Risk Analysis, John Wiley & Sons, vol. 32(4), pages 644-658, April.
    6. Charlotte Benson & Edward J. Clay, 2004. "Understanding the Economic and Financial Impacts of Natural Disasters," World Bank Publications - Books, The World Bank Group, number 15025.
    7. Youbaraj Paudel, 2012. "A Comparative Study of Public—Private Catastrophe Insurance Systems: Lessons from Current Practices," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 37(2), pages 257-285, April.
    8. Youbaraj Paudel & W J Wouter Botzen & Jeroen C J H Aerts, 2012. "A Comparative Study of Public–Private Catastrophe Insurance Systems: Lessons from Current Practices," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 37(3), pages 603-603, July.
    9. Kousky, Carolyn, 2014. "Informing climate adaptation: A review of the economic costs of natural disasters," Energy Economics, Elsevier, vol. 46(C), pages 576-592.
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