AbstractResilience is defined as “The ability to prepare and plan for, absorb, recover from and more successfully adapt to adverse events” (US National Academies). Resilience has four pillars: • Anticipate: the ability to anticipate and reduce the impact of shocks through preparedness and planning, • Absorb the ability to absorb and cope with the impacts of shocks and stresses. • Adapt: the ability to change in response to multiple, long-term and future risks, and to learn and adjust after a shock materializes. • Transform: the ability to take deliberate steps to change the systems that create risk, vulnerability and or inequality. How does insurance intervene in building resilience? The outcome of insurance is to restore property and livelihoods in case of an adverse effect. It does that by providing a cash infusion into the socio-economic system of the affected communities immediately after the event. The cash is used to restore property and avoid interruption of commercial and industrial activity. Insurance also intervenes in terms of reducing impact of stresses (which are the more extensive types of risk) since it enables a system of “maintenance” by providing funds for recovery under minor but more frequent events. For most developing countries, governments have been the insurer of last resort when it comes to catastrophe risk (referred to as Cat Risk in the insurance industry). The reason is that level of cat insurance penetration in most developing countries is very low, sometimes lower than 1%. The assurance of government intervention coupled with the lack of effectiveness of the financial transaction associated with a traditional insurance policy negate any incentive for individuals to acquire a cat insurance policy. The Turkish Compulsory Insurance Program or TCIP is one of the early experiment to change that paradigm and to provide a meaningful role for cat insurance in emerging economies. After a slow start, TCIP has now developed the financial capacity and the spread of coverage to play a significant role both in the financing of risk but also in supporting earthquake risk reduction in Turkey. New cat insurance products based on parametric indexing have since emerged. These insurance products could further improve the efficiency of TCIP and other cat insurance pools by making them more attractive to individuals, thereby scaling up their contribution to building resilience.
INNOVATIONS in earthquake risk reduction for resilience: RECENT advances and challenges
