This paper examines the role that insurance and mitigation can play in reducing losses from natural disasters using data collected as part of a large-scale study on catastrophic risk jointly undertaken by the Wharton Risk Management Center in conjunction with Georgia State University and the Insurance Information Institute. The paper graphically demonstrates why disaster losses have increased in the past twenty-five years and the magnitude of the problem today. It then shows how mitigation measures can reduce future losses using data (...) on residential homes from four states facing severe risks from hurricanes. Insurance premiums can be used to incentivize homeowners to invest in protective measures if disaster coverage programs adhere to a set of guiding principles. The paper proposes long-term insurance as a way of reducing losses from future disasters and addressing concerns facing insurers and homeowners in hazard-prone areas. (shrink)

Previous research has discovered a curious phenomenon: groups cooperate less than individuals in a deterministic prisoner’s dilemma game, but cooperate more than individuals when uncertainty is introduced into the game. We conducted two studies to examine three possible processes that might drive groups to be more cooperative than individuals in reducing risks: group risk concern, group cooperation expectation, and pressure to conform to social norms. We found that ex post guilt aversion and ex-post blame avoidance cause group members to be (...) more risk concerned than individuals under uncertainty. These concerns drive groups to choose the cooperation (and risk-reduction) strategy more frequently than individuals. Groups also have higher cooperation expectations for their corresponding groups than individuals have for their corresponding individuals. We found no evidence of pressure to conform to social norms driving groups to be more cooperative than individuals. (shrink)