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Mitigating Natural Hazard Risk through Building Retrofits by Public-Private Partnerships between Governments and Insurance Firms

Miroslaw Skibniewski is leading a study titled, “Mitigating Natural Hazard Risk through Building Retrofits by Public-Private Partnerships between Governments and Insurance Firms.”

As stated in the study, public-private partnerships involving governments and insurers have been used globally in natural hazard mitigation. However, these partnerships are still problematic for key stakeholders in developing countries: homeowners are hesitant to purchase insurance and invest in retrofit projects due to economic burden; insurers are reluctant to insure potential losses because of unclear risk of insolvency. In this study Skibnewski and fellow researchers explore the role of public-private partnerships among homeowners, insurers and governments in regards to the relationship between hazard insurance and structural retrofit of vulnerable buildings. Accordingly, the group introduces an innovative framework that governments can utilize for motivating insurers to cover homeowners’ losses in exchange for an affordable premium. This framework can help insurance firms reduce their legally mandated minimum capital assets required for disbursement to insurance policy holders; such a reduction would stem from the reduced risk of insolvency of the insurance firm.

At the same time, homeowners can be motivated to purchase multi-year hazard insurance coverage in exchange for government-paid retrofit of their buildings. Governments will be partially reimbursed by insurance firms for the cost of these retrofits based on their savings stemming from the reduction of mandatory capital minima.

A case study is to be conducted to test the feasibility of this approach in mitigating seismic risk to residential buildings in a rural area. The proposed novel solution is likely to provide policymakers with a public-private partnership program as a new tool for motivating both the insurers and the homeowners to undertake building retrofit projects for the mitigation of natural disasters.

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STORY HIGHLIGHTS
 
Miroslaw Skibniewski is leading a study titled, “Mitigating Natural Hazard Risk through Building Retrofits by Public-Private Partnerships between Governments and Insurance Firms.”
 
The study explores the role of public-private partnerships among homeowners, insurers, and governments in regards to the relationship between hazard insurance and structural retrofit of vulnerable buildings.