Strengthening climate-resilient development and transformation in Viet Nam

Climate change is presenting an ongoing and eminent threat to various regions, communities and infrastructure worldwide. In this study, the current and future climate impacts faced by Viet Nam due to Tropical Cyclones (TCs), specifically wind and surge, are evaluated, and different adaptation measures to manage this risk are appraised. The level of wind and storm surge risk was assessed focusing on three categories of assets: residential houses, agriculture, and people. The expected damage to these assets was then evaluated based on their exposure to the hazard under current and future climate scenarios. Physical adaptation measures such as mangroves, sea dykes, and gabions, and financial adaptation measures such as risk transfer via insurance were applied to the expected future risk and evaluated based on a socio-economic cost–benefit analysis. The output will give decision-makers the ability to make more informed decisions, prioritize the most cost-effective adaptation measures and increase physical and financial resilience. The results indicated significant TC exposure in future climate scenarios due to economic development and climate change that almost doubles the current expected damage. Surge-related damage was found to be many times higher than wind damage, and houses had more exposure (value in total) than agriculture on a national scale. The physical adaptation measures are successful in significantly reducing the future wind and especially surge risk and would form a resilient strategy along with risk transfer for managing TC risks in the region.

Precaution Strategy of Moral Hazard Practice in Agricultural Insurance in Indonesia: An Approach of Soft Systems Methodology

This paper uses Soft Systems Methodology (SSM) to formulate strategies to prevent moral hazard acts in agricultural insurance in Indonesia. Agricultural insurance takes place, mainly, through Rice Crop Insurance and Cattle Insurance. Generally, the strategies that can be performed to minimize moral hazard practice in agricultural insurance programs are: developing the capacity of human resources, improving field communication, enforcing penalties, institutional strengthening, and adding new products through Islamic agricultural insurance. Specifically, this paper proposes that the prevention of moral hazard practices can be done by implementing Islamic agricultural insurance systems with the concept of risk-sharing instead of risk transfer.

Strengthening Climate-Resilient Development and Transformation in Viet Nam

Climate change is presenting an ongoing and eminent threat to various regions, communities and infrastructure worldwide. In this study, the current and future climate impacts faced by Viet Nam due to Tropical Cyclones (TCs), specifically wind and surge, are evaluated, and different adaptation measures to manage this risk are appraised. The level of wind and storm surge risk was assessed focusing on three categories of assets: residential houses, agriculture, and people. The expected damage to these assets was then evaluated based on their exposure to the hazard under current and future climate scenarios. Physical adaptation measures such as mangroves, sea dykes, and gabions, and financial adaptation measures such as risk transfer via insurance were applied to the expected future risk and evaluated based on a socio-economic cost-benefit analysis. The output will give decision-makers the ability to make more informed decisions, prioritize the most cost-effective adaptation measures and increase physical and financial resilience. The results indicated significant TC exposure in future climate scenarios due to economic development and climate change that almost doubles the current expected damage. Surge-related damage was found to be many times higher than wind damage and houses had more exposure (value in total) than agriculture on a national scale. The physical adaptation measures are successful in significantly reducing the future wind and especially surge risk and would form a resilient strategy along with risk transfer for managing TC risks in the region.

Credit Risk Management and Sub-Standard Loans of Commercial Banks in Nigeria: A Panel Data Analysis

This study examined the effect of credit risk management on sub-standard loan portfolio of quoted commercial banks in Nigeria. Cross sectional data was sourced from financial statement of commercial banks and Central Bank of Nigeria Statistical bulletin from 2009-2018. Sub-standard portfolio was used as dependent variable while bank risk diversification, Basel risk compliance, risk transfer were used as independent variables. Panel data methodology was employed while the fixed effects model was used as estimation technique at 5% level of significance. Fixed effects, random effects and pooled estimates were tested while the Hausman test was used to determine the best fit. Panel unit roots and panel cointegration analysis were conducted on the study. The empirical results proved that 41.7 per cent variations in the sub-sub-standard loans’ portfolio was explained by credit risk management. From the random effect results, bank risk transfer and Basel compliance have positive relationship with sub-standard loan portfolio while risk bank risk diversification have negative relationship with sub-stand ad loan portfolio of the commercial banks. We recommend that management of the commercial banks should be pro-active and devise effective measures of managing credit risk to reduce the incidence of sub-standard loans. The monetary authority should monitor the Basel compliance rate and policies of the commercial banks to credit risk management

Catastrophe risk, reinsurance and securitized risk-transfer solutions: a review

PurposeCatastrophe (CAT) events associated with natural catastrophes and man-made disasters cause profound impacts on the insurance industry. This research thus reviews the impact of CAT risk on the insurance industry and how traditional reinsurance and securitized risk-transfer instruments are used for managing CAT risk.Design/methodology/approachThis research reviews the impact of CAT risk on the insurance industry and how traditional reinsurance and securitized risk-transfer instruments are used for managing CAT risk. Apart from many negative influences, CAT events can increase the net revenue of the insurance industry around CAT events and improve insurance demand over the post-CAT periods. The underwriting cycle of reinsurance causes inefficiencies in transferring CAT risks. Securitized risk-transfer instruments resolve some inefficiencies of the reinsurance market, but are subject to moral hazard, basis risk, credit risk, regulatory uncertainty, etc. The authors introduce some popular securitized solutions and use Merton's structural framework to demonstrate how to value these CAT-linked securities. The hybrid solutions by combining reinsurance with securitized CAT instruments are expected to offer promising applications for CAT risk management.FindingsThe authors introduce some popular securitized solutions and use Merton's structural framework to demonstrate how to value these CAT-linked securities. The hybrid solutions by combining reinsurance with securitized CAT instruments are expected to offer promising applications for CAT risk management.Originality/valueThis research reviews a broad array of impacts of CAT risks on the (re)insurance industry. CAT events challenge (re)insurance capacity and influence insurers' supply decisions and reconstruction costs in the aftermath of catastrophes. While losses from natural catastrophes are the primary threat to property–casualty insurers, the mortality risk posed by influenza pandemics is a leading CAT risk for life insurers. At the same time, natural catastrophes and man-made disasters cause distinct impacts on (re)insures. Man-made disasters can increase the correlation between insurance stocks and the overall market, and natural catastrophes reduce the above correlation. It should be noted that huge CAT losses can also improve (re)insurance demand during the postevent period and thus bring long-term effects to the (re)insurance industry.