![]() Raising buildings above expected flood levels is one example of adaptive capacity, which reduces vulnerability. These two homes in a flood-prone area are both exposed, yet the one on the right is obviously more likely to be damaged if a major flood occurs. For each asset-hazard pair, consider the ability of the asset to avoid damage or adapt to its hazard. Does the asset have characteristics that enable it to deal with or adjust to the hazard?Īdaptive capacity-the ability to adjust to new situations-reduces the potential impact of a sensitive asset. For example, assets such as parking lots are generally not sensitive to severe weather.Įven if an asset is sensitive to a hazard, it is not necessarily vulnerable. If the potential impact from a hazard is minimal, the asset is not sensitive.For example, a furniture store is sensitive to flooding. If an asset could sustain a negative impact from a hazard, it is sensitive to that hazard.Is the hazard capable of damaging the asset? To determine if an asset is vulnerable, first consider its sensitivity to the hazards it is exposed to. Knowing the elements of each concept can help you identify specific approaches to building resilience. Be assured that understanding the terms will become more useful as you move forward. Vulnerability is the predisposition or tendency of an asset to be adversely affected by hazards.Īs you begin this step, some of the phrases we use for new concepts may feel like unimportant jargon. Another concept- vulnerability-will help you understand which ones are most and least likely to be harmed. Looking over your list of asset-hazard pairs, you may notice that all assets on the list are not equally likely to be damaged. Assess Vulnerability & Risk Understanding Vulnerability Journal of Financial Economics 65 (2): 283–305.Step 2. Pricing and capital allocation in catastrophe insurance. The Review of Economics and Statistics 91 (1): 1–19. On modeling and interpreting the economics of catastrophic climate change. Increasing risk ii: Its economic consequences. Journal of Monetary Economics 22 (1): 117–131. The American Economic Review 69 (1): 84–96. The design of an optimal insurance policy. Environmental and Resource Economics 54 (2): 179–200. Uncertainty of governmental relief and the crowding out of flood insurance. Risk aversion in the small and in the large. The Journal of Political Economy 76: 553–568. Aspects of rational insurance purchasing. The American Economic Review 68 (2): 64–69. Economics, psychology, and protective behavior. Journal of Risk and Uncertainty 23 (2): 103–120. Recovery From Natural Disasters: Insurance or Federal Aid?. Risk Management and Decision Processes Center, The Wharton School, University of Pennsylvania. Does federal disaster assistance crowd out private demand for insurance, 10. The Geneva Papers on Risk and Insurance-Issues and Practice 37 (2): 206–227. Explaining the failure to insure catastrophic risks. Journal of Risk and Insurance 64: 205–230. Catastrophe insurance, capital markets, and uninsurable risks. Insurance: Mathematics and Economics 64: 306–312. Expected utility and catastrophic consumption risk. Decisions from experience and the effect of rare events in risky choice. Annals of Economics and Statistics/Annales d’Économie et de Statistique 129: 53–83. Natural disasters: Exposure and underinsurance. The comparative statics of changes in risk revisited. Journal of Financial Economics 60 (2): 529–571. The market for catastrophe risk: A clinical examination. The Quarterly Journal of Economics 131 (1): 1–52.įroot, K.A. Journal of Environmental Management 58 (2): 109–117.įarhi, E., and X. Risk aversion and the external cost of a nuclear accident. ![]() Journal of Banking & Finance 26: 557–583.Įeckhoudt, L., C. Can insurers pay for the “big one”? measuring the capacity of the insurance market to respond to catastrophic losses. Natural catastrophe insurance: How should the government intervene? Journal of Public Economics 115: 1–17.Ĭummins, J.D., N. The Quarterly Journal of Economics 121 (3): 823–866.Ĭharpentier, A., and B. Rare disasters and asset markets in the twentieth century. Liquidity preference, lecture vi in” lecture notes for economics 285, the economics of uncertainty”, 33–53.
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