6.7 Changing weather patterns Flashcards
1
Q
Catastrophic loss definition
A
Losses as a result of extreme weather events
2
Q
What are the two main ways of dealing with the risk of catastrophes?
A
- Avoidance - taking steps to eliminate the financial impact of the event
- Preparation - recognising that we cannot stop a weather event from happening, but taking steps to reduce loss when it does happen
3
Q
What does the Environment Agency advise in regard to flooding insurance?
A
- Shop around for the best insurance policy
- If they cannot find affordable insurance through a normal insurance provider they should look for a specialist broker who will negotiate on their behalf
4
Q
How do insurance companies try to limit their exposure to extreme weather events?
A
By issuing ‘catastrophe bonds’, each of which is based on a certain specifically defined disaster
5
Q
How do catastrophe bonds work?
A
- Investors purchase the bonds and receive a good rate of interest as long as the disaster does not occur
- If or when it does occur, they lose their capital and the insurance company does not have to pay them back what they invested