WP4: Insurance markets
Effective risk management includes aspects of risk reduction, risk retention as well as risk transfer. Insurance – as well as other forms of formal and informal risk transfer – plays an important role in allowing for swift reconstruction and reestablishment of livelihoods after a shock, thereby limiting the depth and length of (economic) disruptions for the individual and for societies. It can strengthen risk understandings in general, and provides a pricing signal on risks which ultimately may contribute to better risk management behavior.
Yet, there are also existing questions of moral hazard – insured populations refraining from risk prevention because of expected pay-outs. Also nat-cat insurance – especially in Germany – is voluntary and not common in the flood affected areas in North Rhine-Westphalia and Rhineland Palatine. Gaps in insurance protection, and underinsurance, put large pressure on governments to provide post disaster reconstruction relief, raising questions around fiscal sustainability as well as social fairness. Affordability and accessibility of insurance coverage in areas at risk might become an issue of concern, exacerbated by growing risk levels due to climate change and unsustainable land use decisions. Nat-cat insurance markets are usually government regulated and need to be embedded in a broader perspective of risk governance. Providing insights into such broader questions will be the goal of this work package.
Specific research questions and dialogues include inter alia:
Further topics may be added in the coming months.