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- Title
The Role of Financial Instruments in Integrated Catastrophic Flood Management.
- Authors
Ermolieva, Tatiana; Ermoliev, Yuri; Fischer, Guenther; Galambos, Istvan
- Abstract
The main goal of this paper is to develop a flood management model that takes into account the specifics of catastrophic risk management: highly mutually dependent losses, the lack of information, the need for long-term perspectives and explicit analyses of spatial and temporal heterogeneities of various agents such as individuals, governments, and insurers. We use modified data from a pilot region of the Upper Tisza river, Hungary, to illustrate the evaluation of a public multi-pillar flood loss-spreading program involving partial compensation to flood victims by the central government, the pooling of risks through a mandatory public catastrophe insurance on the basis of location-specific exposures, and the demand for a contingent ex-ante credit to reinsure the insurance's liabilities. GIS-based catastrophe models and stochastic optimization methods are used to guide policy analysis with respect to location-specific risk exposures. We use economically sound risk indicators leading to convex stochastic optimization problems strongly connected with nonconvex insolvency constraint, VaR and CVaR (JEL G22, G28, C61).
- Subjects
TISZA River; HUNGARY; EMERGENCY management; MODELS &; modelmaking; FLOODS; RISK management in business; MATHEMATICAL optimization; INSURANCE companies
- Publication
Multinational Finance Journal, 2003, Vol 7, Issue 3/4, p207
- ISSN
1096-1879
- Publication type
Article