Insurance as an Efficient Means to Cover the Risk of Natural Disasters

Damage caused by natural disasters (including floods, avalanches, earthquakes) has assumed ever greater proportions in recent years. From a macroeconomic point of view, the extent of such damage is to be kept as low as possible, guarding the population from situations that can threaten their livelihood. Balancing that risk, whether through insurance or through public aid, is thus of critical importance. An international comparison looks at the methods used by various countries to achieve such a risk balance. Based on the economic literature, criteria are developed for efficient forms of carrying the risk. Evaluations of past losses and risk categories for properties are used to illustrate loss potentials.