Wiley Handbook of Science and Technology for Homeland Security, 4 Volume Set

RISK TRANSFER AND INSURANCE: INSURABILITY CONCEPTS AND PROGRAMS FOR COVERING EXTREME EVENTS

HOWARD C. KUNREUTHER AND ERWANN O. MICHEL-KERJAN

Center for Risk Management and Decision Processes, the Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania

1 INTRODUCTION

The United States has extensive experience with natural catastrophes. But the hurricanes that occurred in the Gulf Coast during the 2004 and 2005 seasons have changed the landscape forever. Coupled with the terrorism attacks of September 11, 2001, there is recognition by both the public and private sectors that one needs to rethink our strategy for dealing with these low probability but extreme consequence events.

The 2002 White House National Strategy defines homeland security as “the concerted effort to prevent attacks, reduce America's vulnerability to terrorism, and minimize the damage and recover from attacks that do occur”. To succeed, homeland security must be a national and comprehensive effort. Moreover, that definition must apply to technological and natural disasters as well.

While protecting residential and commercial construction and critical infrastructure services (transportation, telecommunications, electricity and water distribution, etc.) in risky areas may limit the occurrence and/or the impacts of major catastrophes, we know that major disasters will still occur. In these situations one must provide adequate emergency measures and rapidly restore critical services. The question as ...