The Transition from Private to Public Insurance for Natural Hazards: A Review of International Experiences

Abstract

Natural hazard events are particularly difficult to insure through the private market, so governments often end up acting as insurers, reinsurers, or insurers-of-last-resort, either through public-private partnerships or through fully public systems.

This report discusses the process of public disaster insurance establishment around the world and attempts to identify recurrent themes associated with the process. Considerations include establishment incentives, the role of risk knowledge, government deliberations and legislative proposals for establishment, and the surrounding changes in disaster mitigation. It describes the disaster loss compensation systems present preceding public disaster insurance establishment and some of their limitations.

The paper shows that many public disaster insurance systems were established following a major disaster. It details the establishment process as regards the initial legislative proposals and studies, the creation and implementation of the schemes and the surrounding broader changes in disaster mitigation.

The authors conclude by summarising the main implications of these past experiences to current and future ones and what is still missing in our knowledge about the performance of these systems.