Earthquake insurance: Lessons from international experience and key issues for developing earthquake insurance in the PRC
Catastrophe (including earthquake) insurance can help relieve the financial burden on the government to fund relief and recovery of the affected population by spreading the risks and costs of disasters.
Pricing of catastrophe insurance policies can provide proper incentives and thus help limit future damage from natural hazards by influencing investment and land development decisions.
International experience suggests key aspects for successful catastrophe insurance include (i) affordability to the insured; (ii) universal coverage; (iii) financial sustainability; and (iv) incorporation of measures to limit or avoid damage.
Based on international experience and country-specific issues, we recommend that (i) the Government establish comprehensive and compulsory catastrophe insurance instead of just earthquake insurance; (ii) both central and local governments share contributions to a catastrophe fund; (iii) risk information should be developed, synchronized, and shared across government agencies, commercial insurers, and the general public; and (iv) disaster management should be incorporated into development planning and project approval.
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