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.
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Kunreuther, H. Mitigating disaster losses through insurance. J Risk Uncertainty 12, 171–187 (1996). https://doi.org/10.1007/BF00055792
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DOI: https://doi.org/10.1007/BF00055792