Advertisement

Disaster risk reduction and international catastrophe risk insurance facility

  • Nipawan ThirawatEmail author
  • Sirikamon Udompol
  • Pathomdanai Ponjan
Original Article

Abstract

The objectives of this research are to investigate resource loss effects from flooding and to provide recommendations on disaster risk reduction policies. This research utilized a dynamic computable general equilibrium (CGE) model, which found that losses of resources had major negative impacts on real gross domestic product (GDP). Transitioning from national catastrophe insurance fund to an international risk pooling approach is discussed, and as the Global Catastrophe Risk Insurance Facility has not yet been established, our proposal suggests the Association of Southeast Asian Nations plus three (ASEAN + 3) Catastrophe Risk Insurance Facility (ACRIF) and the Association of Southeast Asian Nations plus three catastrophic bonds (ASEAN + 3 CAT bonds) as effective means of reducing fiscal liabilities arising from natural disasters, also effectively enhancing disaster risk reduction. These tools are complementary to Catastrophe Risk Swaps which are innovative global financial adaptation strategies designed to make communities and governments more resilient to disaster damages. They are ex-ante risk financing tools and sources of liquidity for damage restoration and economic recovery, which facilitates flexibility among the Association of Southeast Asian Nations plus three (ASEAN + 3) and other governments requiring special assistance. Most importantly, utilization of insurance and catastrophic bonds promotes the achievement of set objectives of global adaptation strategies, sustainable economic growth, and climate resilient development.

Keywords

Catastrophe insurance Catastrophic bond Risk reduction Disasters Risk financing Computable general equilibrium model International risk pooling Adaptation strategies 

References

  1. Abe S, Thangavelu SM (2012) Natural disasters and Asia. Asian Economic Journal 26(3):181–187. doi: 10.1111/j.1467-8381.2012.02081.x CrossRefGoogle Scholar
  2. Asian Development Bank (2009) Natural catastrophe risk insurance mechanisms for Asia and the Pacific. Asian Development Bank, Manduluyong City, PhilippinesGoogle Scholar
  3. Centre for NTS Studies (2010) The implementation of a disaster management agreement in ASEAN: towards regional preparedness? The S. Rajaratnam School of International Studies, SingaporeGoogle Scholar
  4. Centre of Policy Studies (2010a) Maintenance manual of MyAGE: a dynamic CGE model of the Malaysian economy. Centre of Policy Studies, Monash University, MelbourneGoogle Scholar
  5. Centre of Policy Studies (2010b) Operation manual of MyAGE: a dynamic CGE model of the Malaysian economy. Centre of Policy Studies, Monash University, MelbourneGoogle Scholar
  6. Centre of Policy Studies (2010c) Theoretical manual of MyAGE: a dynamic CGE model of the Malaysian economy. Centre of Policy Studies, Monash University, MelbourneGoogle Scholar
  7. Cummins JD, Mahul O (2009) Catastrophe risk financing in developing countries: principles for public intervention. The World Bank, Washington, D. C., http://siteresources.worldbank.org/FINANCIALSECTOR/Resources/CATRISKbook.pdf Google Scholar
  8. Department of Disaster Prevention and Mitigation (2006) Report on regional establishment of the ASEAN coordinating center for humanitarian assistance. Department of Disaster Prevention and Mitigation, BangkokGoogle Scholar
  9. Dixon PB, Rimmer MT (2002) Dynamic general equilibrium modelling for forecasting and policy: a practical guide and documentation of MONASH. North-Holland Publishing Company, AmsterdamGoogle Scholar
  10. Giesecke JA, Burns WJ, Barrett A et al (2012) Assessment of the regional economic impacts of catastrophic events: CGE analysis of resource loss and behavioral effects of an RDD attack scenario. Risk Analysis 32(4):583–600. doi: 10.1111/j.1539-6924.2010.01567.x CrossRefGoogle Scholar
  11. Hayashi T (2012) Japan’s post-disaster economic reconstruction: from Kobe to Tohoku. Asian Economic Journal 26(3):189–210. doi: 10.1111/j.1467-8381.2012.02082.x CrossRefGoogle Scholar
  12. Hochrainer S, Mechler R (2011) Natural disaster risk in Asian megacities: a case for risk pooling? Cities 28(1):53–61. doi: 10.1016/j.cities.2010.09.001 CrossRefGoogle Scholar
  13. Horridge JM (2003) ORANI-G: a generic single-country computable general equilibrium model. Centre of Policy Studies, Monash University, MelbourneGoogle Scholar
  14. Jha AK, Barenstein JD, Phelps PM et al (2010) Safer homes, stronger communities: a handbook for reconstructing after natural disasters. The World Bank, Washington DCCrossRefGoogle Scholar
  15. Kaushalya H, Karunasena G, Amarathunga D (2014) Role of insurance in post disaster recovery planning in business community. Procedia Economics and Finance 18:626–634CrossRefGoogle Scholar
  16. Michel-Kerjan E, Zelenko I, Cardenas V et al (2011) Catastrophe financing for governments: learning from the 2009-2012 MultiCat program in Mexico. OECD Working Papers on Finance, Insurance and Private Pensions No. 9, OECD Publishing. DOI  10.1787/5kgcjf7wkvhb-en
  17. Mochizuki J, Vitoontus S, Wickramarachchi B et al (2015) Operationalizing iterative risk management under limited information: fiscal and economic risks due to natural disasters in Cambodia. International Journal of Disaster Risk Science (in press). DOI  10.1007/s13753-015-0069-y
  18. National Catastrophe Insurance Fund (2012) http://www.ncif.or.th/en/%E0%B8%9E%E0%B8%A3%E0%B8%81.pdf
  19. O’Donnell I (2009) Practice review on innovations in finance for disaster risk management: a contribution to the ISDR global assessment report on disaster risk reduction. ProVention Consortium with contributions from Christian Aid, AIDMI, and UN/ISDR. Geneva, Switzerland. http://www.preventionweb.net/english/hyogo/gar/background-papers/ documents/Chap6/ProVention-Risk-financing-practice-review.pdf
  20. Perry G (2009) Beyond lending how multilateral banks can help developing countries manage volatility. Center for Global Development, Washington DCGoogle Scholar
  21. Resosudarmo BP, Sugiyanto C, Kuncoro A (2012) Livelihood recovery after natural disasters and the role of aid: the case of the 2006 Yogyakarta earthquake. Asian Economic Journal 26(3):233–259. doi: 10.1111/j.1467-8381.2012.02084.x CrossRefGoogle Scholar
  22. Shook G (1997) An assessment of disaster risk and its management in Thailand. Disasters 21(1):77–88. doi: 10.1111/1467-7717.00045 CrossRefGoogle Scholar
  23. Sirisan K, Kositanurit B, Bunyarat M et al (2011) A study on developing an ex ante disaster risk financing as a part of comprehensive fiscal risk management framework. Fiscal Policy Office, Royal Thai Ministry of Finance, Bangkok, ThailandGoogle Scholar
  24. United Nations Office for Disaster Risk Reduction (2015a) Making development sustainable: the future of disaster risk management. Global assessment report on disaster risk reduction, Geneva, SwitzerlandGoogle Scholar
  25. United Nations Office for Disaster Risk Reduction (2015b) The human cost of weather related disasters 1995-2015. The United Nations Office for Disaster Risk Reduction, Geneva, SwitzerlandGoogle Scholar
  26. World Bank (2002) Catastrophes and development: integrating natural catastrophes into development planning. Working Paper Series No. 4Google Scholar
  27. World Bank (2012a) Advancing disaster risk financing and insurance in ASEAN member states: framework and options for implementation. The World Bank, Washington DCGoogle Scholar
  28. World Bank (2012b) Caribbean catastrophe risk insurance facility (CCRIF). The World Bank, Washington DCGoogle Scholar

Copyright information

© Springer Science+Business Media Dordrecht 2016

Authors and Affiliations

  • Nipawan Thirawat
    • 1
    Email author
  • Sirikamon Udompol
    • 2
  • Pathomdanai Ponjan
    • 2
  1. 1.Business Economics ProgramMahidol University International CollegeSalayaThailand
  2. 2.Fiscal Policy OfficeThai Ministry of FinancePhyathaiThailand

Personalised recommendations