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Funding Major Disasters With Traditional Insurance

The number and type of disasters and their costs continue to increase. In the natural disaster context, one sector of society in particular, the business community, has recently become a focal point for researchers and insurers. A new advisory group - the business continuity planner - has evolved to assist the business community confront natural disaster issues. Despite the name, contingency plans offered by the majority of business continuity planners tend to direct attention to business survival rather than continuation. Typical approaches centre on internal organisational mechanisms, such as encouraging senior management buy-in, developing emergency preparedness procedures, or staff training programs. However, in the context of natural disaster impact, a recent hazard shift within the research community reveals additional external factors that are at least as important with respect to business survival and continuity. These external factors have not been firmly embedded within the business continuity planning framework. This paper compiles some important external factors that recent disaster research has revealed, and which provide a fuller explanation as to why some businesses become victims of disaster. These findings provide further encouragement for the insurance industry to continue taking a more holistic approach to risk management.

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