5 insurance solutions to deal with disaster risks ... Get to know them

Catastrophic risk is the danger in which a large number of individuals are exposed to a great loss due to the occurrence of the danger, and the catastrophic risk can be in the form of a natural disaster (earthquakes, floods, or tsunamis) or a terrorist attack, which leads to loss of life and the destruction of infrastructure on a large scale. Wide.

The term “catastrophe” in the property insurance industry refers to natural disasters or man-made disasters, which are unusually severe, and the event is classified by the insurance industry as a disaster if the claims related to it are expected to reach a certain threshold. Of dollars (which it was agreed to set at present at 25 million dollars), and a certain number of policyholders and insurance companies are affected by it. "

Insurance-based solutions in catastrophic risk management depend on the degree to which the insured risks reach the parties who bear the risks in the end, which are:

1- National disaster insurance pools: any country can establish a pool to cover its own disaster risk when the risks are large enough and the risk correlation between the participating clients is relatively low, and over time the surplus (pooled premiums) accumulates within the pools, and over time their adoption decreases. On reinsurers, it also reduces government financial liability in relation to natural disasters by transferring risks abroad, and reduces the chances of fluctuating domestic insurance rates to cover property.

2 - Microinsurance: It is distinguished from other types of insurance by providing affordable coverage for low-income clients.

3 - Reinsurance: Reinsurance companies can work to diversify risks that individual insurance companies cannot compensate for internally.

4 - Individual commercial insurance contracts: they can provide individual coverage against disasters, but they require a higher premium.

5- Transferring catastrophic risks to the capital markets through the use of Cat Bonds.

For its part, the Egyptian Insurance Federation has adopted a project to establish a natural hazards pool, in the belief of the union in the importance of taking such a step in the Egyptian market, developing the best possible work strategy for this group, as well as getting acquainted with international experiences in this regard.