Risk Governance: the challenge of risk transfer instruments and catastrophic events
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The document discusses risk governance challenges around catastrophic events and risk transfer instruments. It uses Bogota, Colombia as a case study. It is known that Bogota faces earthquake risks and has taken mitigation measures. However, there is still uncertainty around the costs of future disasters and how losses will be paid. While compulsory insurance is proposed, the market penetration is only around 10% due to a lack of incentives and proper risk assessment. It is unclear how to make insurance mandatory and punish the uninsured.
![RISK GOVERNANCE THE CHALLENGE OF RISK TRANSFER INSTRUMENTS AND CATASTROPHIC EVENTS OSCAR GUEVARA MSc, Ma, PgDip Lecturer El Rosario University, Faculty of Urban Planning and Development, Bogota - Colombia Lecturer, Los Andes University, Faculty of Economics, Bogota - Colombia IDRC – DAVOS 2010 OSCAR GUEVARA [email_address]](https://image.slidesharecdn.com/guevara-risk-transfer-and-risk-governanceppt2457/85/Risk-Governance-the-challenge-of-risk-transfer-instruments-and-catastrophic-events-1-320.jpg)
![THE FUNDAMENTAL QUESTION ,[object Object],[object Object],[object Object],[object Object],[object Object],IDRC – DAVOS 2010 OSCAR GUEVARA [email_address]](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)
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Risk Governance: the challenge of risk transfer instruments and catastrophic events
- 1. RISK GOVERNANCE THE CHALLENGE OF RISK TRANSFER INSTRUMENTS AND CATASTROPHIC EVENTS OSCAR GUEVARA MSc, Ma, PgDip Lecturer El Rosario University, Faculty of Urban Planning and Development, Bogota - Colombia Lecturer, Los Andes University, Faculty of Economics, Bogota - Colombia IDRC – DAVOS 2010 OSCAR GUEVARA [email_address]
- 3. (1) WHAT WE KNOW IDRC – DAVOS 2010 OSCAR GUEVARA [email_address]
- 4. (1) WHAT WE KNOW IDRC – DAVOS 2010 OSCAR GUEVARA [email_address] Knowledge Mitigation Emergency Preparedness Post Disaster Reconstruction Risk Transfer Earthquakes HAZARD MAPS MICROZONIFICATION OF THE CITY LOCAL EFFECTS STUDIES ADOPTION OF HAZARD MAPS IN LAND USE CODES AND PLANS
- 7. (1) WHAT WE KNOW Knowledge Mitigation Emergency Preparedness Post Disaster Reconstruction Risk Transfer Earthquakes Risk Scenario Day Night Casualties 55.532 33.629 Injures 148.074 110.278
- 8. (1) WHAT WE KNOW IDRC – DAVOS 2010 OSCAR GUEVARA [email_address] PERCENTAGE OF DESTROYED AREAS 10 % E2 SCENARIO Knowledge Mitigation Emergency Preparedness Post Disaster Reconstruction Risk Transfer Earthquakes RISK SCENARIO U$ M E1 14.000 E2 8.800 E3 5.100
- 9. (1) WHAT WE KNOW Pakistan - 2005 Colombia . Pizarro 2004 Colombia . Armenia 1999 Haiti - 2010 IDRC – DAVOS 2010 OSCAR GUEVARA [email_address] AN EXPECTED COMBINATION OF SCENARIOS LEADS TO A RISK GOVERNANCE DECISION COMPULSORY INSURANCE (EARTHQUAKES AND FIRES)
- 11. WHAT WE EXPECT A MARKET SOLUTION BASED ON A SUPPLY AND DEMAND SCHEME TOTAL CONTRUCTED AREA (*) 181 Millones de M2 TOTAL PROPERTIES 900.000 INSURABLE PROPERTIES(**) 200.000 TOTAL INSURABLE AREA (**) 41,5 Millones DE M2 INSURABLE VALUE 20.000.000 COL $ M - 10.000 U$M INSURABLE VALUE 8.000.000 COL $ M - 4.000 U$M EXPECTED ANNUAL RATES 40.000 COL$M - 20U$M EXPECTED ANNUAL RATES 16.000 COL$M - - 8U$M
- 13. THE LEGO THEORY OF RISK TRANSFER INSTRUMENTS
- 14. THE LEGO THEORY OF RISK TRANSFER INSTRUMENTS
- 15. THE LEGO THEORY OF RISK TRANSFER INSTRUMENTS FINANCE RECONSTRUCION (BUY LEGO BUCKETS) FINANCE RECONSTRUCION (BUY LEGO HOUSES)
- 16. THE EMPIRICAL DATA RISK GOVERNANCE PRATICE PROPOSED BY THE NATIONAL LAW TRADITIONAL AND CURRENTLY IMPLEMENTED COMMERCIAL PRACTICE L OW INCOME HOUSEHOLDS MIDDLE INCOME HOUSEHOLDS HIGH INCOME HOUSEHOLDS AVERAGE COMMERCIAL VALUE OF A 100 M2 PROPERTY 40k – 50k U$ 236 % 100k – 120k U$ 244% > 150k U$ 300% AVERAGE RECONSTRUCION VALUE OF A 100 M2 PROPERTY 18k – 20k U$ 40k – 50k U$ 60k – 75k U$
- 17. INCONSISTENT RISK GOVERNANCE GOVERNMENT WANTS TRANFER PRIVATE LOSSES TO HOUSE OWNERS , THROUGH COMPULSORY INSURANCE GENERAL PUBLIC DEMANDS CEDE PRIVATE LOSSES TO INSURANCE COMPANIES, TROUGH A INSURANCE CONTRACT INSURANCE SECTOR IS OFFERING SATISFY DEMAND OF A “POLICY DRIVEN” COMMERCIAL PRODUCT
- 27. THANK YOU OSCAR GUEVARA MSc, Ma, PgDip [email_address] IDRC – DAVOS 2010 OSCAR GUEVARA [email_address]
Editor's Notes
- How can the government offer financial support? Which party should the government subsidize? Should the government give money (directly) to insurance companies, reinsurers, or insuree? Which way is the most efficient? How to determine the burden distribution between the government and insurance companies? Policy insurance: large coverage / high penetration rate Insurance companies: