Risk Management for Natural Perils

Loss statistics for natural disasters demonstrate, also after correction for inflation, a dramatic increase in the loss burden since 1950 which was well confirmed by recent disasters like Hurricane Katrina 2005 and the South Asian tsunami 2004. This increase is driven by a concentration of population and values in urban areas, the development of highly exposed coastal and valley regions, the complexity of modern societies and technologies and probably also by the emerging consequences of global warming. This process will continue unless remedial action is taken. This requires a holistic risk management process which starts with hazard identification and moves on to hazard and risk evaluation. Risk evaluation forms the basis for controlling and financing future losses. Natural disaster insurance plays a key role in this context, but also private parties and governments have to share a part of the risk. A main responsibility of governments is to formulate regulations for building construction and land use. The insurance sector and the state have to act together in order to create incentives for building and business owners to take loss prevention measures.