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Earthquake insurance: Lessons from international experience and key issues for developing earthquake insurance in the PRC

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  • 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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