Lec 4 -Engaging at international (global) level - CAT Flashcards
What is CAT?
Catastrophe modelling; it is a tool for risk management
Learn how to draw the CAT model!!!
Types of disaster risk financing
1) Traditional insurance
• Pay out basis: claims i.e. actual losses
• Advantages = pay-out = loss sustained
• Disadvantages = very slow processes, pay out only pays for the insured assets too
2) Alternative risk transfer instruments (CAT bonds)
• Risk transferred to financial markets - greater risk bearing capacity than insurance/reinsurance firms
• Investors purchase bonds, high returns
• If a specified trigger event occurs, the principle is released the sponsor (i.e. local government)
• If no event occurs b4 the bond matures, the principal together with profit is returned to investors.
• Pay-out basis: trigger mechanism, scenario-based e.g. location and magnitude.
• Advantages: Immediate pay out
• Disadvan: Pay-out basis risk where basis risk = difference between actual losses incurred by sponsor and payment received by sponsor
Who are the end-users of CAT models?
- DRR policy makers in funding organisations e.g. UN
- Governments
- Risk financers
Flood CAT modelling
1) Hazard
• Rain data: intensity-duration-frequency curves
• Catchment identification (land use, geology)
• Inundation maps
2) Vulnerability
• Damage estimation on building type e.g. inundation depth for RC
3) Loss calc.:
• Life Cycle Cost and ROI: effective decision variables for urban flood risk management
- allows for econo. feasibility of different alternatives comparison
- the reduced flood damage to the exposed asset can be avoided costs (LCC) or as returns (ROI)
- use of these measures allows one to see the visible cost of a program over its lifetime