Reducing the fiscal and economic impact of disasters

Number of pages: 20 p.

Managing risk through catastrophe insurance:

This paper offers an in-depth look at how insurance helps to lower the economic and fiscal costs of natural disasters. It demonstrates that insurance is an efficient and effective way to mitigate these impacts. The research presented here can help policy-makers, businesses and homeowners plan for disaster risk and make more informed risk management decisions.

It shares Canada's experience and asserts that insurance improves economic and fiscal outcomes via several channels. Before a disaster strikes, the pricing of insurance gives policyholders an incentive to reduce their exposures through risk mitigation measures. In the aftermath of disaster, insurance transfers the fiscal burden away from taxpayers onto the private sector and into international capital markets. It also limits financial contagion by restoring supply chains and stalled business operations faster, while providing needed liquidity and certainty in business and financial planning. Finally, it recommends that Governments, businesses and households should consider the demonstrated benefits of insurance to manage the looming challenges of climate change and urban growth population, and urges Canada to consider the demonstrated benefits of insurance as they face the coming storms.