A community-based catastrophe insurance (CBCI) program clearly defines before a disaster what type of support will be given to individuals. This facilitates better individual risk management and planning than reliance on uncertain aid. Also, the inclusion of a risk signal in a CBCI program — for example, via a risk reduction surcharge — requires and supports raised awareness of the risk issue among community members.
Providing community members with direct loss payments after an event allows them to put the dollars to their most immediate and beneficial use, for example, if the coverage is parametric.
A new report from Guy Carpenter, Marsh & McLennan Advantage, and the Wharton Risk Management and Decision Processes Center, Community-Based Catastrophe Insurance: A Model for Closing the Disaster Protection Gap, helps to differentiate a CBCI program from disaster aid financing.