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This article examines the potential of pre‐ and post‐disaster instruments for funding disaster response and recovery and for creating incentives for flood loss mitigation in countries with emerging or transition economies. As a concrete case, we discuss the disaster recovery arrangements following the 1997 flood disaster in Poland. We examine the advantages and limitations of hedging instruments, which are instruments for transferring the risk to investors either through insurance or capital market‐based securities. We compare these mechanisms with financing instruments, whereby the government sets aside funds prior to a disaster or taps its own funding sources after the event occurs. We show how hedging instruments can be designed to create incentives for the mitigation of damage to public infrastructure using the flood proofing of a water‐treatment plant on the hypothetical Topping River as an illustrative example. We conclude that hedging instruments can be an attractive alternative to financing instruments that have been traditionally used in the poorer, emerging‐economy countries to fund disaster recovery. Since very poor countries are likely to have difficulty paying the price of protection prior to a disaster, we suggest that international lending institutions consider innovations for subsidizing these payments.

This paper proposes using certified third parties, coupled with Model Risk Management Programs (Model RMPs), to implement EPA's Proposed Rule on the prevention of chemical accidental releases. We concentrate on the insurance aspects of this third‐party approach and show that it could enable insurers to more cost‐effectively provide coverage against the risks of chemical accidental releases. The third‐party approach may also signal the facility's safety and reduce the enforcement costs of regulations.

This paper tests some existing theories developed over the past 25 years on corporate demand for insurance. Using a unique dataset of 1,809 large U.S. corporations it provides the first empirical analysis that compares corporate demand for standard property insurance and for catastrophe coverage (here, terrorism). We find that larger companies are more likely to have some catastrophe coverage. Corporate demand for catastrophe insurance is found to be more price inelastic than insurance for non-catastrophe risks. This result differs from the findings on individual demand for insurance. The terrorism insurance premium per dollar of coverage is twice as high in the New York Metropolitan area than in the rest of the U.S. Yet the price elasticity of the demand for terrorism insurance is half in this area relative to the rest of the country.

This paper investigates the role that performance‐based regulations can play in linking a firm's environmental, health, and safety concerns with their corporate strategy. The specific focus is on the performance standards required by the Clean Air Act Amendments (CAAA) which require firms that store or use certain chemicals to develop a Risk Management Plan (RMP) for reducing the likelihood and impact of accidents at their plants. Data from a series of case studies and interviews of executives in chemical firms reveal that proactive companies integrated many of the requirements of the CAAA into their management systems prior to the regulatory requirements. Most of these firms tend to be large ones. Small firms often lack the resources to implement these regulations and hence have tended to have a more difficult time with compliance.

AbstractNudges based on social norms (norm-nudges) can be compelling behavioral interventions compared with traditional interventions such as taxes and regulations, but they do not work in all circumstances. We tested two empirical norm-nudge frames in an online experiment on taking measures for flood preparedness with large samples of homeowners (N = 1805) in two European countries, to evaluate the possible interactions between norm-nudge effectiveness, individual characteristics, and intercultural differences. We contrasted these norm-nudge treatments with a control and norm-focusing treatment by asking respondents to express their beliefs about what other respondents would do before making a decision relevant to their own payoff. We find no evidence of a treatment effect, suggesting that our social norm-nudges do not affect flood preparedness in the context of a flood risk investment game.