The Role of Financial Instruments in Integrated Catastrophic Flood Management

Tatiana Ermolieva (), Yuri Ermoliev, Guenther Fischer and Istvan Galambos
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Tatiana Ermolieva: International Institute for Applied Systems Analysis, Austria
Yuri Ermoliev: International Institute for Applied Systems Analysis, Austria
Guenther Fischer: International Institute for Applied Systems Analysis, Austria
Istvan Galambos: VITUKI Consult, Hungary

Multinational Finance Journal, 2003, vol. 7, issue 3-4, 207-230

Abstract: The main goal of this paper is to develop a flood management model that takes into account the specifics of catastrophic risk management: highly mutually dependent losses, the lack of information, the need for long-term perspectives and explicit analyses of spatial and temporal heterogeneities of various agents such as individuals, governments, and insurers. We use modified data from a pilot region of the Upper Tisza river, Hungary, to illustrate the evaluation of a public multipillar flood loss-spreading program involving partial compensation to flood victims by the central government, the pooling of risks through a mandatory public catastrophe insurance on the basis of location-specific exposures, and the demand for a contingent ex-ante credit to reinsure the insurance’s liabilities. GIS-based catastrophe models and stochastic optimization methods are used to guide policy analysis with respect to location-specific risk exposures.

Keywords: flood risk; catastrophe modeling; insurance; stochastic optimization; insolvency; contingent credit,; CvaR (search for similar items in EconPapers)
JEL-codes: C61 G22 G28 (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:mfj:journl:v:7:y:2003:i:3-4:p:207-230

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