MITIGATING DISASTER LOSSES THROUGH INSURANCE

Losses from natural disasters have increased in recent years due to gr owth of population in hazard-prone areas and inadequate enforcement of building codes. This article first examines why homeowners have not v oluntarily adopted cost-effective protective measures and have limited interest in purchasing insurance. It then proposes a disaster-managem ent program which utilizes insurance coupled with well-enforced buildi ng codes to reduce future damage. Banks and financial institutions pla y a key role in this program by requiring inspections of homes as a co ndition for a mortgage. New forms of reinsurance coverage against cata strophic losses from natural disasters are necessary to protect insure rs against potential insolvency from the next mega-disaster.