Browsing by Author "Nguyen, Cuong"

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Open Access
Insuring disasters: A survey of the economics of insurance programs for earthquakes and droughts
(Te Herenga Waka—Victoria University of Wellington, 2017) Noy, Ilan; Kusuma, Aditya; Nguyen, Cuong
Natural disasters have adverse consequences. A combination of effective mitigation strategies and appropriate coping measures—decreasing both exposure and vulnerability—can reduce their detrimental impact. Further policies can reduce the consequent losses to the economy in the aftermath of catastrophic events. Although constituting no panacea, the evidence suggests that insurance enables improved recovery and increases resilience. Yet, insuring catastrophic risks is complex and not easily achieved. Different types of disaster insurance products are found globally, but to narrow our discussion, we focus on two types of insurance for catastrophic hazards: earthquake insurance and agricultural insurance (for floods and droughts). We survey strategies implemented by governments, the private sector and multilateral/regional organizations that aim to address several impediments to insurance adoption and also describe the available evidence about the performance of such insurance systems in the aftermath of disaster events. We conclude with some thoughts about future research directions.
Open Access
Insuring earthquakes: How would the Californian and Japanese insurance programs have fared down under (after the 2011 New Zealand earthquake)?
(Te Herenga Waka—Victoria University of Wellington, 2017) Nguyen, Cuong; Noy, Ilan
Earthquakes are insured only with public sector involvement in high-income countries where the risk of earthquakes is perceived to be high. The proto-typical examples of this public sector involvement are the public earthquake insurance schemes in California, Japan, and New Zealand (NZ). Each of these insurance programs is structured differently, and the purpose of this paper is to examine these differences using a concrete case-study, the sequence of earthquakes that occurred in the Christchurch, New Zealand, in 2011. This event turned out to have been the most heavily insured earthquake event in history. We examine what would have been the outcome of the earthquakes had the system of insurance in NZ been different. In particular, we focus on the public earthquake insurance programs in California (the California Earthquake Authority - CEA), and in Japan (Japanese Earthquake Reinsurance - JER). Overall, the aggregate cost to the public insurer in NZ was $NZ 11.1 billion in its response to the earthquakes. If a similar-sized disaster event had occurred in Japan and California, homeowners would have received $NZ 2.5 billion and $NZ 1.4 billion from the JER and CEA, respectively. We further describe the spatial and distributive patterns of these different scenarios.
Open Access
Measuring the impact of insurance on urban recovery with light: The 2011 New Zealand earthquake
(Te Herenga Waka—Victoria University of Wellington, 2018) Nguyen, Cuong; Noy, Ilan
We measure the longer-term effect of a major earthquake on the local economy, using night-time light intensity measured from space, and investigate whether insurance claim payments for damaged residential property affected the local recovery process. We focus on the destructive Christchurch earthquake of 2011 as our case study. In this event more than 95% of residential housing units were covered by insurance, but insurance payments were staggered over 5 years, enabling us to identify their local impact. We find that night-time luminosity can capture the process of recovery and describe the recovery’s determinants. We also find that insurance payments contributed significantly to the process of economic recovery after the earthquake, but delayed payments were less affective and cash settlement of claims were more affective in contributing to local recovery than insurance-managed rebuilding.
Open Access
Who cares? Future sea-level-rise and house prices
(Te Herenga Waka—Victoria University of Wellington, 2019) Filippova, Olga; Nguyen, Cuong; Noy, Ilan; Rehm, Michael
Globally, the single-most observable, predictable, and certain impact of climate change is sea level rise. Using a case study from the Kapiti Coast District in New Zealand, we pose a simple question: Do people factor in the warnings provided by scientists and governments about the risk of sea-level rise when making their investment decisions? We examine the single most important financial decision that most people make – purchasing a home, to see whether prices of coastal property change when more/less information becomes available about property-specific consequences of future sea level rise. The Kapiti Coast District Council published detailed projected erosion risk maps for the district’s coastline in 2012 and was forced to remove them by the courts in 2014. About 1,800 properties were affected. We estimate the impact of this information on home prices using data from all real estate transactions in the district with a difference-in-differences framework embedded in a hedonic pricing model. We find that the posting of this information had a very small and statistically insignificant impact on house prices, suggesting people do not care much about the long-term risks of sea-level rise as they do not incorporate these risks in their investment decisions.