Academic journal article Journal of Risk and Insurance

Financial Risk Management for Natural Catastrophes

Academic journal article Journal of Risk and Insurance

Financial Risk Management for Natural Catastrophes

Article excerpt

Financial Risk Management for Natural Catastrophes, edited by Neil R. Britto and John Oliver (Aon Group Australia, 1997).

Reviewer: David T. Russell, Illinois State University

Financial Risk Management for Natural Catastrophes compiles the proceedings of a conference sponsored by Aon Group Australia on funding losses from natural disasters. The conference welcomed leading insurance practitioners and academics from around the world to discuss both traditional and newly developed techniques for funding catastrophe losses. This volume combines cutting edge theory and practice to bring the reader valuable research on one of the hottest topics in the insurance field today.

The overriding theme of the text is the study of exposure management against the next "big one" at the insurance company level. The text's contents could be classified into three main categories: (1) identification of the exposure to natural hazards; (2) traditional methods for handling catastrophic risk; and (3) innovative financing tools to support claims payments.

Although the book begins with an insurance executive's perspectives on the traditional insurance mechanism, Financial Risk Management for Natural Catastrophes does not dwell on the weaknesses of the existing worldwide insurance and reinsurance structure. Rather, several jurisdictional solutions to private insurance market failures are presented along with future policy implications for government involvement in protection against natural hazard risk. Contributors also study the reinsurance market's ability to cope with low frequency, high severity losses.

Several conference participants focused their papers on quantifying both regional and worldwide exposure to wind, hail, earthquake, and flooding. Of particular note is extensive reference to catastrophe modeling and the problems of catastrophic occurrence prediction. Because climatic events are the most important natural hazards in Australia, weather receives primary descriptive focus. …

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