Aspects of the theory of financial risk management for natural disasters

We analyze two aspects of the theory of financial risk management for natur al disasters such as earthquakes. First, we use the theory of Poisson proce sses to construct a model of an earthquake. We then use this model to provi de an index of the monetary damage from an earthquake. with aftershocks. Se cond, we study the question of business failure, i.e., the likelihood that an insurance provider will become insolvent in the event that earthquake in surance is provided and a major earthquake does in fact occur. (C) 2001 Els evier Science Ltd, All rights reserved.