[P06] An approach towards quantifying and minimizing basis risk in tsunami parametric insurance scheme
Conference Bldg 2F - Sakura Hall
| Affiliation | School of Engineering, Tohoku University |
|---|---|
| Author | 三木 優志 |
| Co-Author | Suppasri Anawat（東北大学 災害科学国際研究所） An-Chi Cheng（東北大学 災害科学国際研究所） Constance Ting Chua東北大学 災害科学国際研究所 岩崎 智哉（スイス・リー・インターナショナル・エスイー日本支店） 篠塚 友吾（スイス・リー・インターナショナル・エスイー日本支店） 小川 剛史（スイス・リー・インターナショナル・エスイー日本支店） 今村 文彦（東北大学 災害科学国際研究所） |
Keywords
- Parametric insurance
- Probabilistic tsunami risk assessment
- Basis risk
Outline
An approach towards quantifying and minimizing basis risk in tsunami parametric insurance scheme
Over the past decade, natural disasters such as the 2011 Tohoku tsunami and Typhoon Jebi (2018) have had devastating impacts on society. Although insurance plays a critical role in disaster risk reduction, a significant gap remains between the economic losses caused by catastrophes and the insured losses. Parametric insurance has emerged as a potential solution for risk financing. Unlike traditional insurance, parametric insurance determines payouts based on the magnitude of the disaster hazard, using a predefined indicator, rather than assessing the actual damage. While this approach offers advantages such as faster payouts, it also introduces basis risk—the discrepancy between the payout and the actual loss—due to imperfect correlation between the chosen indicator and the actual losses. High basis risk can result in insufficient risk mitigation or increased costs for risk financing.This study proposes a methodology to quantify and minimize basis risk in parametric insurance solutions by leveraging probabilistic tsunami risk assessment. It evaluates tsunami wave height at tide gauges and inundation depth inside seawalls as payout indicators. The results demonstrate that optimization can significantly reduce basis risk, particularly when inundation depth is used as the indicator.
