FROM EARTHQUAKES TO THE CAPITAL MARKETS: RISK TRANSFER SOLUTIONS TO MANAGE THE ECONOMIC CONSEQUENCES OF EARTHQUAKES

摘要

Earthquake insurance greatly advances the recovery and reconstruction process after destructive seismic events. However, rather than replace adequate loss prevention and loss reduction measures, insurance should contribute towards a comprehensive risk management approach. Providing earthquake insurance on a stable basis requires a sound risk assessment because earthquake insurance can be successful in the long term only if a reasonable balance is achieved between premiums and losses. The seismic hazard, the vulnerability of the insured objects, their geographical distribution and the impact of applied coverage conditions such as deductibles all need to be quantified as accurately as possible. Information of this kind enables insurers and reinsurers to manage their exposures appropriately. Still, potential losses from a severe earthquake affecting areas with vast amounts of values, such as Tokyo or Los Angeles, might exceed the financial capacity of the insurance and reinsurance industry. A further growth in values is likely in the future, owing partly to the fact that several earthquake-prone areas still have a low insurance density. At this stage, additional risk carriers are approached. Examples taken from recent transactions are used to show how the capital markets can serve as a lender of the last resort in the earthquake risk transfer process.