Short notes on the Prospects of Catastrophe Insurance

Short notes on the Prospects of Catastrophe Insurance

Catastrophes are unexpected occurrences and therefore, best protected through insurance pools. Catastrophes can be extremely large and destructive and hence uninsurable in the absence of the ability to create capacities. Its insurability requires coordinated action on the part of governments and insurers.

There could be tie-up and coordination at regional and international levels for diversifying pools and lowering costs. The insurance facilitates risk taking and asset building across the economy and enables a virtuous cycle of wealth creation. Risk betterment is best possible in open underwriting one innovative approach to rating or risks.

Insurance industry has been traditionally innovative in ensuring insurability in all areas of the economy and has the capability to tailor insurance requirements. The sharing of the risk can be advantageously shared from the level of the policy holder to that of the insurer in catastrophe coverage.

The insurer, global reinsurer, capital markets and government should pool the funds for meeting catastrophic risks in such a way as occurrence of large magnitude do not prove a setback for the economy. There is needed to make all economic losses as insured losses. Appropriate pricing and offering of terms require that the insured is motivated to reduce both physical and moral hazards.

The insurer can use mathematical and technological tools and create maps and models to analyse and understand various risk profile across reforms and risk clusters. Mandatory insurance coverage may be experienced to couple people to join the pool High quality data is required by insurers to control exposures and determine risk premium as well as probable maximum losses.

Once the insurers and government come to take change of risk management in catastrophic area, many risk control measures will fall in place across the economy insurers have definite role in giving a dynamic impetus to an insured economy in hazard identification, risk assessment, risk, preventions and mitigation in the area of catastrophic risks.