Consequences of Financial Vulnerability and Insurance Loading for the Affordability of Earthquake Insurance Systems: Evidence from Iran

Naghmeh Pakdel-Lahiji, Stefan Hochrainer-Stigler (), Mohsen Ghafory-Ashtiany () and Mehdi Sadeghi
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Naghmeh Pakdel-Lahiji: Department of Civil Engineering, Science and Research Branch, Islamic Azad University, Tehran, Iran. E-mails: Naghmeh.pakdel@gmail.com; sadeghi.m@srbiau.ac.ir
Stefan Hochrainer-Stigler: IIASA—International Institute for Applied Systems Analysis, Laxenburg, A-2361, Austria.
Mohsen Ghafory-Ashtiany: Department of Special Structures, International Institute of Earthquake Engineering and Seismology, 19537, Tehran, Iran.
Mehdi Sadeghi: Department of Civil Engineering, Science and Research Branch, Islamic Azad University, Tehran, Iran. E-mails: Naghmeh.pakdel@gmail.com; sadeghi.m@srbiau.ac.ir

The Geneva Papers on Risk and Insurance - Issues and Practice, 2015, vol. 40, issue 2, 295-315

Abstract: Many governments provide financial assistance for reconstruction of damaged housing units after a disaster in order to prevent vulnerable households from falling into poverty traps or entering low growth cycles. To lessen these risks and the overall financial burden on the public sector after extreme events, private insurance schemes provide one viable solution. In this paper, the possible effects of such solutions are assessed for District 1 of Shiraz, Iran, based on recent probabilistic earthquake risk modelling. The work explicitly focuses on the financial vulnerability of different household groups as well as possible increases in premiums due to uncertainties in the underlying risk model through the use of loading factors. The results are compared with current non-probabilistic-based premiums that are used by most insurance companies in Iran, and recommendations are given as to which schemes may fit best or could be affordable for society to manage future earthquake risks.

Date: 2015
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