The Mitigation of Socio-natural Hazards through Smart Insurance Contracts
Andrea Jonathan Pagano

27.03.2024. 14:00, Rīgas Tehniskās universitātes Dabaszinātņu un tehnoloģiju fakultātē, Āzenes ielā 12/1, 115. auditorijā.

Francesco Romagnoli

Gatis Bažbauers, Sara Landini, Fausto Marincioni

Climate change has amplified the frequency and severity of natural calamities, encompassing a growing trend of extreme climatic events and facing substantial threats to global communities, ecosystems, and economies. Within this background, the intertwining of urbanization and climate change, impacting societal and economic dimensions, pose key challenges for European urban centers in the foreseeable future. A spectrum of financial instruments has emerged to finance projects reducing hazardous impacts on communities, standing out as a powerful and versatile tool for managing the financial consequences of natural disasters. For instance, Catastrophe Bonds can be employed to transfer risks tied to potential disasters to financial markets, while Resilience Bonds have been introduced to support resilient infrastructure initiatives, reducing the susceptibility to large-scale risks in potential disasters. Thus, insurance mechanisms assume a pivotal role in mitigating climate change-related disasters by providing financial support to implement risk mitigation strategies and becoming essential drivers for managing the risks associated with climate change. This Doctoral Thesis delves into insurance's multifaceted and multidisciplinary role in protecting individuals, communities, and societies against the financial burdens of socio-natural disasters. The research seeks to provide a comprehensive understanding of the dynamic mechanisms through which insurance functions as a risk transfer and risk reduction instrument. It also examines its potential for influencing disaster preparedness, resilience, and urban-societal adaptation. By combining empirical evidence, theoretical insights, and case studies, this research investigates the evolving role of disaster insurance, including the challenges and opportunities it presents in the face of an increasingly unpredictable climate. More specifically, this thesis aims to contribute to clarifying the proactive role of insurance in disaster risk management to provide policymakers, insurer companies, and researchers with valuable insights into optimizing insurance frameworks for a more resilient and sustainable future. More in detail, a final System Dynamics model is created to assess the feedback effects of floods on urban areas in the Latvian context by implementing a novel Bayesian adaptive insurance scheme mechanism. This model integrates an innovative and proactive role for the insurance sector, involving the insurance company directly in co-financing risk reduction and mitigation investments. The model assesses the impacts of natural hazards through probabilistic simulations, utilizing the probability-impact curve for socio-natural hazards to explore the multidimensionality, dynamics, short- and long-term perspectives, and different likelihoods of flood occurrence, not captured yet in one single assessment tool. The validation of the research approach in case studies allows for an understanding of the limitations and strengths of the developed tool. The thesis introduction outlines the practical significance of the subject toward the specific study's objectives, tasks, and hypotheses. The first chapter conducts a literature analysis, examining key aspects related to the definition of socio-natural hazards, urban and infrastructural resilience, and the evolving role of insurance companies in socio-natural risk reduction. It emphasizes novel tools such as Smart Contracting for implementing Blockchain Technology and underscores the key role of this technology in insurance mechanisms for cultural heritage. This initial section explains the research needs in connection with the Doctoral Thesis. 4 The second chapter discusses the research methods employed, while chapter three details the results obtained from studies aligned with the proposed research method. The results chapter provides the main findings from each part of the methodological approach. It emphasizes a novel mechanism based on a Bayesian adaptive insurance scheme addressing flooding risk directed towards public administration. This mechanism incorporates Smart Contracts and is further applied in developing a dynamic urban assessment tool for socio-natural hazards, with a specific focus on floods in the Latvian context. The thesis concludes with recommendations and conclusions to promote a more proactive role of the insurance sector towards disaster risk reduction strategies and mechanisms.

Climate change; Socio-natural Hazards

Pagano, Andrea Jonathan. The Mitigation of Socio-natural Hazards through Smart Insurance Contracts. PhD Thesis. Rīga: [RTU], 2024. 278 p.

Publication language
English (en)
The Scientific Library of the Riga Technical University.
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