Solving Commitment Problems in Disaster Risk Finance
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World Bank, Washington, DC
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Those at risk from natural disasters are
typically under-protected, possibly because they expect
benefactors such as governments and donors to come to their
aid. Yet when relief comes, it is often insufficient,
delayed or misallocated. Benefactors may wish to commit to
provide an efficient amount of fast well-targeted relief,
and leave the rest up to recipients, but such commitments
are difficult. This article analyses how transferring risk
to third-parties such as private insurers may help resolve
these commitment problems. Using a simple model of disaster
risk finance is used to identify three distinct commitment
problems and then show how various properties of risk
transfer schemes can help to resolve these problems. The
paper illustrates how these commitment problems play out
using examples from around the world, and demonstrates where
risk transfer schemes seem to have helped in practice.
Overall, the findings show that the benefits of such schemes
depend on the relative severity of the different commitment problems.
Palabras clave
RISKS, UNCERTAINTIES, RESCUE, NATURAL DISASTER INSURANCE, EARLY WARNING, PUBLIC ECONOMICS, RISK REDUCTION, WIND SPEED, INCOME, INTEREST, MARGINAL COST, INSURER, INFORMATION, PROGRAMS, REVENUES, WELFARE, INSURANCE POLICIES, LUMP SUM, INCENTIVES, DISASTER, MODELS, PRICING, PRIVATE REINSURANCE, PRIVATE INSURANCE, PRICE, INSURANCE RISK, INFORMATION SYSTEMS, INSURANCE SCHEME, EARTHQUAKES, INSURANCE COMPANY, CATASTROPHE INSURANCE, DISASTER RELIEF, CROP INSURANCE, REINSURERS, SAVINGS, INSURANCE SYSTEMS, RELIEF, DEVELOPMENT ECONOMICS, NATURAL DISASTER, DISASTER RESPONSE, MORAL HAZARD, INSURANCE PRODUCT, INSURANCE PAYOUT, NATURAL DISASTERS, MARKETS, DISASTERS, INSURERS, RATES, ACTUARIALLY FAIR INSURANCE, CYCLONES, FAMINE, INSURANCE COVERAGE, INSURANCE POLICY, PUBLIC INSURANCE, FINANCE, BANKS, DRAWN DOWN, TECHNOLOGY, REINSURANCE, CONSUMPTION, TROPICAL CYCLONE, EMERGENCY, EARTHQUAKE, DISASTER REDUCTION, DISASTER RISK, POLICIES, DROUGHT, INSURANCE SCHEMES, INSURANCE PRODUCTS, CROP INSURANCE SCHEME, VALUE, LOSSES, POLICY MAKERS, BANK, CREDIT, INSURANCE CONTRACTS, DISASTER RISK FINANCING, CLIMATE, AGRICULTURAL INSURANCE, DEMAND, UTILITY FUNCTION, DROUGHT INSURANCE, CONSUMERS, DAMAGE, DISASTER INSURANCE SCHEME, NATURAL CATASTROPHE, DISASTER INSURANCE, INSURANCE REGULATION, INSURANCE PREMIUM, REGULATION, RISK TRANSFER, POLICY, WORLD HEALTH ORGANIZATION, INSURANCE, LOSS, AGENTS, RISK INSURANCE, DISASTER AID, HURRICANE, RISK, INDEMNITY, MITIGATION, PRIVATE INSURANCE COMPANIES, TROPICAL CYCLONES, SUPPLY, UNDERWRITING, DISASTER RISK REDUCTION, LAW, INVESTMENTS, RISK MANAGEMENT, CROP INSURANCE PROGRAM, INSURANCE COMPANIES, MARGINAL UTILITY, BASIS RISK, COVERAGE, RISK ASSESSMENT, BENEFITS, RECONSTRUCTION, RISK MITIGATION, PREMIUMS