The private insurance industry is part of a larger community that bears the costs of weather-related events (Ryland, 2000). The nature and cost of weather-related losses vary considerably around the globe, as does the portion of the loss that is privately insured. Private insurance pays a higher proportion of benefits for storm-related losses than for any other weather-related event, although flood insurance has a particularly low rate of coverage (Figure 8-6).

Insurers bear only 20% of the total economic costs of weather-related events globally. The ratio is far lower in developing countries (e.g., 7% in Africa and 4% in Asia for the year 1998) (Munich Re, 1999b). Even in countries where insurance penetration is high, insurance can account for less than half of the weather-related payouts—for example, 27% in Europe, 30% in the United States, 34% in Australia (Munich Re, 1999b), and 20% in Canada (EPC, 2000). In a review of four major wildfire and flood catastrophes in Australia, Leigh et al. (1998a,b) found that private-sector insurers bore 9-39% of the total economic losses; a comparable amount was provided by local and federal governments. Other entities assuming such costs include federal disaster relief providers, local governments, and uninsured property owners (Pielke and Landsea, 1998)—as in the case of Hurricane Andrew, in which only half of the losses were insured (Pielke, 1997).

One important risk-assuming group, the corporate self-insurance market, is growing rapidly. In the United States, such premiums are approaching the level of the traditional commercial insurance market (roughly US$134 billion) (Best's Review, 1998; Bowers, 1999).

Where insurers will not or are directly or indirectly regulated not to accept specific catastrophe risks, governments in many countries—including Belgium, France, Japan, The Netherlands, New Zealand, Norway, Spain, and the United States—may adopt the role of insurer or reinsurer or of regulator in establishing risk-pooling mechanisms (III, 2000b). Programs in France, Japan, and New Zealand explicitly define the governments' role as paying for "uninsurable damages" (CCR, 1999; Gastel, 1999). In some countries (e.g., Canada, Finland, France, Norway, the United States) this is the case for drought or other agricultural risks, and in others (e.g., Japan) this is limited to earthquake risks. Such schemes can grow rapidly, as illustrated by the jump in the numbers of policies under the Florida Windstorm Underwriting Association from 62,000 to 417,000 between 1992 and 1997 (Anderson, 2000).

Government's role in providing resources for disaster preparedness and recovery and insurance products related to natural disasters also is a key moderating factor in insurers' involvement in such risks. It can be a two-edged sword: It provides a platform for private industry to participate, but it also can drive consumers away from commercial market solutions (Klein, 1997; Pullen, 1999a). The absolute value of government payments for natural disasters is poorly documented, and the statistical record is fragmented. The United States made disaster-related payments of US$119 billion (1993 US$) over the 1977-1993 period, equivalent to an average of US$7 billion yr^-1 (Anderson, 2000). The Japanese government has devoted 5-9% of its national budget to disaster preparedness and recovery in recent decades (Sudo et al., 2000).

Flood insurance merits special mention, given the magnitude of risks and losses, the difficulty of establishing fair and actuarially based rates, and the connection between flood and climate change (see Chapter 4; Aldred, 2000). Recent analyses in the United States found that 25% of homes and other structures within 150 m of the coastline will fall victim to the effects of erosion within 60 years (Heinz Center, 2000). Sea-level rise will impact flood insurance through inundation and erosion resulting from storm surge (see Chapter 6). Countries differ widely with regard to their approach to defining and financing flood risks via private-sector (re)insurance versus public mechanisms (Van Schoubroeck, 1997; Gaschen et al., 1998; Hausmann, 1998). Hybrid public-private systems and government-only systems also can be found (e.g., in the United States), as can systems with no formal flood insurance whatsoever.

Table 8-3: Billion-dollar and larger insurance losses, 1970-1999, as of December 2000 (Munich Re, 2000). Figures are adjusted for inflation (1999 values).
Year	Event	Area	Insured Losses (US$M)	Economic losses (US$M)	Ratio of Insure d / Economic Losses
1992	Hurricane Andrew	USA	20,800	36,600	0.57
1994	Northridge earthquake	USA	17,600	50,600	0.35
1991	Typhoon Mireille	Japan	6,900	12,700	0.54
1990	Winterstorm Daria	Europe	6,800	9,100	0.75
1989	Hurricane Hugo	Caribbean, USA	6,300	12,700	0.50
1999	Winterstorm Lothar	Europe	5,900	11,100	0.53
1987	Winterstorm	Western Europe	4,700	5,600	0,84
1998	Hurricane Georges	Caribbean, USA	3,500	10,300	0.34
1995	Earthquake	Japan	3,400	112,100	0.03
1999	Typhoon Bart	Japan	3,400	5,000	0.60
1990	Winterstorm Vivian	Europe	2,800	4,400	0.64
1999	Winterstorm Martin	Europe	2,500	4,100	0.61
1995	Hurricane Opal	USA	2,400	3,400	0.71
1999	Hurricane Floyd	USA	2,200	4,500	0.49
1983	Hurricane Alicia	USA	2,200	3,500	0.63
1991	Oakland fire	USA	2,200	2,600	0.85
1993	Blizzard	USA	2,000	5,800	0.34
1992	Hurricane Iniki	Hawaii	2,000	3,700	0.54
1999	Winterstorm Anatol	Europe	2,000	2,300	0.87
1996	Hurricane Fran	USA	1,800	5,700	0.32
1990	Winterstorm Wiebke	Europe	1,800	3,000	0.60
1990	1990 WinterstormHerta	Europe	1,800	2,600	0.69
1995	Hurricane Luis	Caribbean	1,700	2,800	0.61
1999	Tornadoes	USA	1,485	2,000	0.74
1998	Hailstorm, tempest	USA	1,400	1,900	0.74
1995	Hailstorm	USA	1,300	2,300	0.57
1993	Floods	USA	1,200	18,600	0.06
1998	Ice storm	Canada, USA	1,200	2,600	0.46
1999	Hailstorm	Australia	1,100	1,500	0.67
1998	Floods	China	1,050	30,900	0.03

A central question is whether changes in natural disaster-related losses will generate increased reliance on already overburdened government-provided insurance mechanisms and disaster assistance. Governments already are showing decreased willingness to assume new weather-related liabilities, and tensions concerning risk-sharing between local and federal government bodies also are evident (Fletcher, 2000)

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