 The Financial Management of Catastrophic Flood Risks in Emerging‐Economy CountriesHoward C. Kunreuther and Joanne Linnerooth‐Bayer Risk Analysis, 2003, vol. 23, issue 3, 627-639 Abstract: This article examines the potential of pre‐ and post‐disaster instruments for funding disaster response and recovery and for creating incentives for flood loss mitigation in countries with emerging or transition economies. As a concrete case, we discuss the disaster recovery arrangements following the 1997 flood disaster in Poland. We examine the advantages and limitations of hedging instruments, which are instruments for transferring the risk to investors either through insurance or capital market‐based securities. We compare these mechanisms with financing instruments, whereby the government sets aside funds prior to a disaster or taps its own funding sources after the event occurs. We show how hedging instruments can be designed to create incentives for the mitigation of damage to public infrastructure using the flood proofing of a water‐treatment plant on the hypothetical Topping River as an illustrative example. We conclude that hedging instruments can be an attractive alternative to financing instruments that have been traditionally used in the poorer, emerging‐economy countries to fund disaster recovery. Since very poor countries are likely to have difficulty paying the price of protection prior to a disaster, we suggest that international lending institutions consider innovations for subsidizing these payments. Date: 2003 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wly:riskan:v:23:y:2003:i:3:p:627-639 Access Statistics for this article More articles in Risk Analysis from John Wiley & Sons |
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