Navigating the New Normal: Understanding Disaster Insurance in a Changing World

The New Normal: Record-Breaking Disasters

Carolyn Kousky, in her new book Understanding Disaster Insurance: New Tools for a More Resilient Future, aptly describes the current state of global disasters as 'record-breaking is the new normal.' Recent years have seen unprecedented natural disasters, from the largest wildfires in California and Australia to the earliest and strongest hurricanes. The COVID-19 pandemic and the largest cyberattack to date further underscore the increasing frequency and severity of global risks.

Insurance: More Than Just a Financial Shield

Kousky explains that insurance is not merely a financial tool but a mechanism to transfer money from good times to bad. However, she emphasizes that insurance alone is not enough; it must be complemented by risk reduction measures. For instance, upgrading to a fortified roof in hurricane-prone areas can significantly reduce risk, making insurance more affordable. This dual approach is crucial in a world where climate change is exacerbating natural disasters.

Innovation and Policy: Key to Future Resilience

Kousky's book delves into the complexities of insurance markets, regulations, and risk transfer mechanisms. She highlights the spectrum of insurability, from auto collisions to destructive earthquakes and hurricanes. Recent data shows that while insurance penetration in developed countries is high, it remains low in many developing regions, highlighting the need for innovative solutions and policy interventions. For readers, understanding these complexities is vital for making informed decisions about risk management and resilience.