Possibilities of Using Insurance for Earthquake Risk Management in Pakistan

Abstract eng:
Pakistan, a developing nation with a population of 169million is located in world’s one of the most seismically active and geologically complex regions. The most recent large magnitude event to occur was the October 8, 2005 Magnitude 7.6 Kashmir Earthquake. Over 80,000 people were killed and the violent ground shaking led to the collapse and extensive damage to over 450,000 buildings, leaving 2.8million people without shelter and an estimated public and private asset loss of US$2.3billion. The aftermath of this event presented many challenges to those involved in the recovery process due to insufficient availability of funds, resources and institutional capacity. The reconstruction cost of US$3.5billion, was in large part funded by external donors in packages of aid and loans over several phases. Over two years following the event, the reconstruction of homes is yet to be completed. This raises questions as to whether the availability of capital immediately following the event could have shorten the recovery time of the housing sector. This paper presents the work from an ongoing research initiative to develop an insurance led risk financing model to manage the earthquake risk in Pakistan. The catastrophe modelling approach was adopted to develop the loss metrics, exceedance probability (EP) and average annual loss (AAL) for residential occupancies in the Kashmir Earthquake affected provinces. This preliminary study shows that the pure premium per household exceeds the affordable level of insurance premium and hence alternative risk transfer schemes should be devised to provide earthquake insurance coverage for homeowners.

• Export as: BibTeX | MARC | MARCXML | DC | EndNote | NLM | RefWorks
• Add to your basket