This website uses cookies to ensure you have the best experience. Learn more

Insurance And Natural Disaster Risks Essay

2047 words - 9 pages

Insurance is a very important factor to attaining financial capacity in an economy. It is a very difficult concept that requires extensive knowledge of insurable interests, risk assessment and management. This essay seeks to provide an overview of insurance specifically on assessment, measurement and management of both man-made risks and natural disaster risks. The essay further highlights the formulas adopted in measuring man-made risks. In addition, it would provide development and challenges arising out of the use of the risk assessment formulas. Finally, the essay will highlight the difficulty previously arising out of assessing, measuring and managing natural disaster risks. Also, it ...view middle of the document...

However, the insurance cover issued by investors the borrowers managed to transport their goods in easy way. This aspect increased trade freely which might lead to increasing the gross domestic product of nations. Westall (2002) said that since its inception the concept of insurance has been "revolutionized" and is comprehensive enough to meet the need for a wide range of risks manmade or natural risks (Westall 2002).
There are two types of risks manmade and natural disaster. A man-made risk means a disaster to the environment that done by man’s actions. This includes, terrorism act, war, automobile or fire risks. It has been said that such risks are highly frequent and less severe in respect to the insurer (Emblemsverg 2008). As a result, a spread of information is available to estimate the likelihood of prospective loss. On the other hand, natural risks are derived from nature. They are less frequent and very severe. Also, the information on the likelihood of loss and occurrence is less. It has been mentioned that this aspect makes it very difficult to cover natural disasters. However, it might be developed as the science and technology has generated solutions to this issue (Emblemsverg, 2008).
Modelling Techniques
At first the credit derivatives, share derivatives and rate derivatives moved the market prior to the 1980. After that, risk coverage and awareness were the market standard (Tseng et al, 2011). The inception of credit derivatives reduced the aspect of risk coverage and awareness to obsolete even at its speculative level. However, The term credit derivatives are to be understood that a value derivative of the credit risk correlated with the core debt. According to Tesin et al (2011) stated this is because of the shift was occasioned by the general public’s resort in acquiring debt to finance projects. Moreover, the move introduced a new risk modelling formula “Gaussian Copula formula”. It has been pointed that this formula measures the correlation between risk and the history of credit-derived price. The formula might be simple compared with previous formula. Salmon (2012) said that long term insurance companies might easily adopt this formula. The formulae "Gaussian Copula" were mechanical, as they required actual checking of every person’s history. Alternatively, the "Gaussian Copula" formula simply requires general knowledge of the market upon which the risk is determined and reasonable risk management mechanisms adopted (Salmon, 2012). The available historical information on the market trend and mathematical formulae represented a shift from checking the history to make sure risk level to support the mathematical formulae (ibid).
According to Danielson (2008) that each model choice will affect the outcome of results depend on the time to which they were adopted to estimate. For example the “Discount Cash Flow” model is only tailored to estimate risk within a period of five years. Further more, it is cash flow based on...

Find Another Essay On Insurance and Natural Disaster Risks

Attention Material Essay

954 words - 4 pages Mitigation? 1. Mitigation is the effort to reduce loss of life and property by lessening the impact of disasters. (FEMA) 2. In order for Mitigation to be effective we need to understand risks, choices, investment and well-being. C. Mitigation's Value to Society 1. Safer communities due to a reduced in life losses and structural damage. 2. Minimized flood disaster and increased resiliency factor. 3. Less financial impact on individuals

The Weather and The Insurance Industry

1305 words - 6 pages insurance companies to manage the new risks of a changing climate. It looks at the various aspects of financial insurance modeling, risk reduction, and climate change in developing countries. The insurance industry has had a past history of dis-incentivizing efforts to reduce risk, otherwise known as moral hazard, which contributes to a lack of coverage from the consumer perspective. The current DRM (Disaster Risk Model) that insurance companies used

Disaster Recovery Planning

1267 words - 5 pages providers. 8. Insurance for losses - the greatest cost would be the operational and support units, such as IT. Therefore, the company should assess and request prices from disaster recovery vendors (per requirement/set of criteria) to factor in cost of restoration in the event of a disaster. The consequence for not having insurances will result in higher costs in replacement and restoration of hardware and related technology during a disastrous event

Pros and Cons of the Private Insurance Industry

3353 words - 13 pages associated with natural disasters and increasing efforts for equity in the industry in the world. I shall illustrate the benefits of insurance mechanism and a wide range of activities that the industry has worked on, and the potential of a contribution to the international aid programme as a challenge in the future. 2. Insurance mechanism What is insurance? There are a wide range of surrounding risks in activities for individual and companies, such

Natural and Man Made Disasters

2100 words - 8 pages Insurance program” which is aimed to provide subsidize insurance provided to consumers because it will be affordable and more appealing to them. Although this program is having deficit problems but it did increase the number of people buying insurance against natural disaster Hurricane. Works Cited H. C. Kunreuther, M. V. Pauly and S. McMorrow (2013), Insurance and Behavioural Economics: Improving Decisions in the most Misunderstood Industry

Insurance - The need of the hour

1695 words - 7 pages worldwide loss experience which it uses not only in calculating premiums commensurate with the risk and classifying hazard areas , known as rating zones, but also tracing relationships between event intensity and loss intensity and estimating loss potential from realistic disaster scenarios".(Atmanand , "Insurance and Disaster Management in the Indian Context", Disaster prevention and Management, Volume 12,issue 4,2003). The underwriting profit is

Safeguarding Environment for Disaster Risk Reduction

991 words - 4 pages which people live, affect how much people are affected by the disaster. In order to protect the environment and ourselves from the harmful effects of a disaster, we have to prepare ourselves in advance to face them. Disaster risk reduction (DRR) is a methodical approach towards recognizing, evaluating and reducing the risks of disaster. It aims to decrease socio-economic vulnerabilities to disaster as well as dealing with the ecological and other

Insurance sector in india

4943 words - 20 pages . Pension business also derives from life insurance in as much as the pension outgo again depends upon the laws of mortality. The forays made by insurance companies in this area are, therefore, natural corollary of their business.The insurance industry consists mainly of insurance carriers (or insurers) and insurance agencies and brokerages. In general, insurance carriers are large companies that provide insurance and assume the risks covered by the

distinguish between general insurance and life insurance

724 words - 3 pages for any property damage covered under the terms of the insurance policy. Health insurance will provides a way to transfer the financial cost of certain health risks away from us to an insurance company so that an illness does not financially ruin us. The premium the variable in it. Moreover, the premium payment generally in single premium. General Insurance is basically covering the things that have a financial value in life and has a

Catastrophe Bonds: The New Insurance

2925 words - 12 pages   Catastrophe bonds are a new type of insurance securitization and have become increasingly popular in the insurance industry throughout the 21st century. Unlike traditional reinsurance products, cat bonds are “fixed income instruments issued primarily by insurers and reinsurers as a way of passing on their exposure to potential large financial risks associated with natural catastrophes” (Ip). in the form of an insurance linked security. These

Ice Storms and Severe Winter Storms

2949 words - 12 pages the home to respond in the event of an emergency. More specifically, they are pre disaster risk reduction (mitigation) behaviour where the public is already aware of risks of fire and carbon monoxide poisoning, but the installation of alarms helps them to evacuate and call for assistance on time, thus reducing their vulnerability to the risks.As Coppola (2007) indicates, the main goals of preparedness in the event of a disaster is being informed

Similar Essays

Risks And Potential Impact Relating To Security, Auditing And Disaster Recovery

600 words - 2 pages will be on file with the insurance company and at an offsite location. System backups are also secured at an offsite location. Additionally, approaches to the elimination and minimization of the risks are suggested.Risk rating is as follows: 5 - Very High Risk; 4 - High Risk; 3 - Medium Risk; 2 - Low Risk; 1 - Very Low RiskTABLE 1 - SECURITY RISK ASSESSMENTAssets &FunctionsWeightHuman ErrorViruses, WormsTheft of Property / InformationHackers

A Creative Essay Dealing With The Many Faces Of Tragedy Throughout Wars, Illness And Natural Disaster

561 words - 2 pages -World War 1 1981 Influenza. Either way, everyone has experienced the tragic effects of illness at some point in their life. For example, if a child finds out that one of their parents is stricken by a form of cancer, he/she will be devastated. Thus, illness can be spontaneous and unpredictable, yet it is to be expected any point in one’s life. It is very similar to natural disaster.Natural Disaster can be any terrible event, not caused by

Why Are More People Who Are At Risk Of Suffering Losses From Disasters (Both Natural And Man Made) Not Insured Against Them, And What Policies Might Increase The Prevalence Of Insurance Against...

1956 words - 8 pages Examination Number: B030015Course: Economics 2Course Organiser: Michael WattsDate of Submission: 30/01/2014Question Why are more people who are at risk of suffering losses from disasters (both natural and man-made) not insured against them, and what policies might increase the prevalence of insurance against catastrophic losses?Word Count: 1941IntroductionInsurance is the one of the world's oldest financial tools. Traders have practiced it since

Why Are More People Who Are At Risk Of Suffering Losses From Disasters (Both Natural And Man Made) Not Insured Against Them, And What Policies Might Increase The Prevalence Of Insurance Against...

1956 words - 8 pages Examination Number: B030015Course: Economics 2Course Organiser: Michael WattsDate of Submission: 30/01/2014Question Why are more people who are at risk of suffering losses from disasters (both natural and man-made) not insured against them, and what policies might increase the prevalence of insurance against catastrophic losses?Word Count: 1941IntroductionInsurance is the one of the world's oldest financial tools. Traders have practiced it since