Disaster Insurance Reimagined: Protection in a Time of Increasing Risk

Protection Gap Entities (PGEs) are not-for-profit entities that provide insurance protection that would otherwise be unavailable in a purely private sector context. They are becoming increasingly important in making sure that funds are available to rebuild after disasters. This book examines the role of PGEs in both insurance protection and their potential to create a more resilient society. It uses practical examples from different countries to explain how PGEs step in to maintain disaster insurance and how their work can, but does not always, improve financial and physical resilience to disaster.

Format: Hardback
Length: 176 pages
Publication date: 01 August 2023
Publisher: Oxford University Press

This book delves into the expanding significance and role of Protection Gap Entities (PGEs), non-profit entities that offer insurance protection that would otherwise be unavailable within a purely private sector context. Across the globe, PGEs and the insurance instruments they employ are becoming increasingly vital in ensuring the availability of funds for rebuilding after disasters. These PGEs, typically developed as collaborations between governments and the insurance industry, enable insurance to continue despite the challenges posed by climate change, urbanization, global interdependence, and geo-political instability, which have made disaster insurance increasingly expensive or unavailable. Given their growing importance, understanding the role of PGEs in both insurance protection and their potential to foster a more resilient society is paramount.

Disaster Insurance Reimagined employs practical examples from various countries to elucidate how PGEs step in to maintain disaster insurance and how their work can, but does not always, enhance financial and physical resilience to disaster. Drawing on five years of research into 17 entities that provide insurance coverage in 49 countries, the authors examine the strengths, limitations, and evolution of PGEs in providing disaster protection amidst a growing insurance crisis. They offer an accessible discussion of disaster insurance, its complexities, and the transformative changes it must undergo to remain relevant and contribute to meaningful disaster protection. PGEs and their work present a pathway toward re-imagining disaster insurance.

The book begins by providing an overview of the insurance landscape, highlighting the challenges faced by the private insurance sector in meeting the growing demand for disaster insurance. It then introduces PGEs and their role in bridging the protection gap. PGEs are typically developed as collaborations between governments and the insurance industry, with the government providing the necessary regulatory framework and the insurance industry providing the technical expertise and capital.

One of the key strengths of PGEs is their ability to provide insurance coverage in areas where the private insurance market is either unavailable or insufficient. For instance, PGEs can offer insurance to individuals and communities living in disaster-prone regions, such as coastal areas or regions with high risk of natural disasters. They can also provide insurance to sectors that are traditionally underserved by the private insurance market, such as small businesses or low-income households.

Another advantage of PGEs is their ability to offer insurance at a lower cost compared to the private insurance market. This is because PGEs are not subject to the same profit margins and regulatory requirements as private insurers, allowing them to pass on savings to their customers. PGEs can also leverage their government partnerships and access to public funds to provide additional financial support to disaster victims.

However, PGEs also face several challenges. One of the biggest challenges is the risk of moral hazard, which occurs when individuals or communities take risks knowing that they are insured. This can lead to an increase in the frequency and severity of disasters, as individuals or communities may not take the necessary precautions to prevent or mitigate the impact of disasters. PGEs also face the challenge of managing the financial risks associated with providing insurance coverage, particularly in the event of a large-scale disaster.

To address these challenges, PGEs have evolved over time. Many PGEs have developed risk management strategies to mitigate the risk of moral hazard, such as risk-sharing agreements or risk-pooling mechanisms. They have also developed partnerships with private insurers to provide additional coverage and financial support in the event of a large-scale disaster.

In conclusion, this book provides a comprehensive examination of the growing role and importance of PGEs in providing disaster insurance. PGEs and their work offer a valuable solution to the challenges faced by the private insurance sector in meeting the growing demand for disaster insurance. By leveraging their government partnerships and access to public funds, PGEs can provide insurance coverage to individuals and communities in need, at a lower cost compared to the private insurance market. However, PGEs also face several challenges, such as moral hazard and financial risk management. To address these challenges, PGEs have evolved over time and have developed risk management strategies to mitigate the risk of moral hazard and manage the financial risks associated with providing insurance coverage. As the demand for disaster insurance continues to grow, PGEs will play an increasingly important role in ensuring that funds are available to rebuild after disasters.

Weight: 430g
Dimension: 163 x 242 x 18 (mm)
ISBN-13: 9780192865168