Introduction

• Author: Howard Kunreuther,Carolyn Kousky
• Date: 01 March 2018
• DOI: http://doi.org/10.1111/rmir.12095
• Published date: 01 March 2018

Risk Management and Insurance Review

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Risk Management and Insurance Review, 2018, Vol.21, No. 1, 7-9

DOI: 10.1111/rmir.12095

INTRODUCTION

Carolyn Kousky

Howard Kunreuther

This issue of the Risk Management and Insurance Review features a set of papers devel-

oped for a workshop entitled “Improving Disaster Risk Financing: Evaluating Policy

Interventions in Disaster Insurance Markets” co-organized by Resources for the Future

and the Risk Management and Decisions Processes Center at the Wharton School of

the University of Pennsylvania. The workshop was held November 29 and 30, 2016, at

Resources for the Future in Washington, D.C. Roughly 75 experts from the public and

private sectors systematically evaluated how disaster insurance programs could be used

with other policy tools to improve individuals’ and communities’ resilience to natural

disasters. Specifically, the workshop addressed ways to:

1. design efficient and fair disaster insurance systems that encourage investments in

cost-effective measures to reduce losses and enhance individual and community

resilience,

2. design disaster financing systems that harness both public- and private-sector

strengths to reduce losses from future catastrophes and aid the recovery process,

3. reduce the disaster insurance coverage gap in the United States.

Since 2000, the U.S. government has spent roughly $265 billion on supplemental appro-

priations for disaster aid. This excludes the over $130 billion appropriated in response

to the 2017 disasters. There is increasing concern that climate change will alter the

frequency, intensity, spatial extent, duration, and/or timing of many weather-related

extreme events. Current approaches to funding these events miss important opportu-

nities to reduce risk and limit fiscal exposure. The papers developed for the workshop

and the discussion among participants identified both the challenges facing disaster

insurance, as well as opportunities for improvement.

Insurance is an essential component of household and community resilience; it protects

families and businesses financially against disaster losses and allows for rebuilding

and recovery. Yet, the same forces that make insurance ever more critical also increase

the challenges for underwriting these risks. Disasters such as floods, earthquakes, and

acts of terrorism pose a challenge for insurance companies due to the potential for

catastrophic losses. In order to meet regulatoryand rating agency requirements, insurers

must have access to sufficient capital to remain solvent after an event. Holding or renting

capital is costly.The premiums associated with insuring catastrophic risks can exceed the

consumer’s ability or willingness to pay for coverage and can create a negative capital

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