Paying the Price

This book considers the effectiveness of insurance coverage for low-probability, high-consequence events such as natural disasters—and how insurance programs can successfully be used with other policy tools, such as building codes and standards, to encourage effective loss reduction measures.

The authors discuss the reasons for the dramatic increase in insured losses from natural disasters since 1989 and the concern that insurers have about their ability to provide coverage against more such events in the future. It addresses why there has been an increasing demand for hazards insurance, what types of coverage private insurers are willing to offer, and the role of reinsurance and private-/public-sector initiatives at the state and federal levels for providing protection to victims of natural disasters.

Detailed case studies of the challenges facing Florida in the wake of Hurricane Andrew in 1992 and California following the Northridge earthquake in 1994 reveal the challenges facing the insurance industry as well as other concerned stakeholders. The National Flood Insurance Program illustrates how a public-/private-sector partnership can mitigate damages and provide financial protection to victims. The book identifies new initiatives for reducing future losses and providing funds for recovery through cooperation by the relevant parties.

• Front Matter
• 1 Introduction
• 2 Insurability Conditions and the Supply of Coverage
• 3 Demand for Disaster Insurance: Residential Coverage
• 4 Earthquake Insurance Protection in California
• 5 Hurricane Insurance Protection in Florida
• 6 The National Flood Insurance Program
• 7 Mitigation and Insurance
• 8 Regulation and Catastrophe Insurance
• 9 A Program for Reducing Disaster Losses Through Insurance
• Appendix A: Commercial Insurance
• Appendix B: Evaluating Models of Risks from Natural Hazards
• Appendix C: Book Links to the World Wide Web
• Glossary
• Bibliography
• Index