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Journal of Risk and Uncertainty

, Volume 12, Issue 2–3, pp 171–187 | Cite as

Mitigating disaster losses through insurance

  • Howard Kunreuther
Article

Abstract

Losses from natural disasters have increased in recent years due to growth of population in hazard-prone areas and inadequate enforcement of building codes. This article first examines why homeowners have not voluntarily adopted cost-effective protective measures and have limited interest in purchasing insurance. It then proposes a disaster-management program which utilizes insurance coupled with well-enforced building codes to reduce future damage. Banks and financial institutions play a key role in this program by requiring inspections of homes as a condition for a mortgage. New forms of reinsurance coverage against catastrophic losses from natural disasters are necessary to protect insurers against potential insolvency from the next mega-disaster.

Key words

natural hazards protective behavior insurance building codes 

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Copyright information

© Kluwer Academic Publishers 1996

Authors and Affiliations

  • Howard Kunreuther
    • 1
  1. 1.Center for Risk Management and Decision Processes, Wharton SchoolUniversity of PennsylvaniaPhiladelphia

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