Has the Time Come for Comprehensive Natural Disaster Insurance?

This paper examines the role that insurance coupled with mitigation can play in reducing losses from future natural disasters while at the same time providing funds for recovery. After examining the decision processes of three interested parties who will be at the centerpiece of such a program, residents in hazard-prone areas, insurers/reinsurers and the government, I provide a rationale for comprehensive disaster insurance as an integral part of a hazard management program. To reduce future losses there is a need for creative private-public partnerships through economic incentives and well-enforced regulations and standards (e.g. building codes). It is also important to consider whether insurance coverage should be voluntary or mandatory, what types of special arrangements should be given to low income families in high hazard areas and whether government should have a role in providing protection against losses from mega-catastrophes.