Australia has an unprecedented opportunity to resolve issues of escalating insurance prices caused by an uncertain climate. The time has come to curb the trend towards increased economic exposure to natural catastrophes.
The recent change of government, the upcoming Australian G20 in Brisbane in 2014, the establishment of the Bushfire and Natural Hazards Research Centre and international support from APEC finance ministers all point towards support for research and action for disaster risk financing.
Disaster risk financing is defined as strategies and instruments used to manage the financial impact of disasters. Disaster risk financing can use mechanisms like budgetary reallocation, debt financing, increased taxation or international aid. Or there are ex ante mechanisms, such as government reserves, insurance, contingent credit or catastrophe-linked securities.
The impetus to develop this kind of financing in Australia has its basis in a number of reports outlining existing inadequacies, including the Victorian Royal Commission final report into the 2009 Black Saturday bushfires and the Natural Disaster Insurance Review in the wake of Queensland’s floods and and Cyclone Yasi. Subsequent reports have affirmed the need for insurance in Australia to be the “key instrument that supports any efforts to maximise national resilience”.
Research abounds concerning the need to implement preferable solutions to the increasing number of catastrophic events, particularly in relation to improving access and affordability of insurance products. Insurance can play a pivotal role in the financial component of disaster risk management, reducing the financial, fiscal and economic impact of disasters as well as promoting faster disaster recovery."...