Panel Discussion 6: Mitigation saves, but we don’t do it. Can multilateral incentives help?
Mitigation saves, but we don’t do it. Can multilateral incentives help?
October 12, 2023
Motivation: close the resilience investment gap in some new way
A system of multi-party resilience incentives
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October 12, 2023
We need a new way to close the resilience investment gap
Nat cats cost $8B per year
= 6% of construction GDP
= 3 weeks of construction
Nat cat losses double every 9 years
= 10x pop growth
= 3x GDP growth
A system of multi-party resilience incentives
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October 12, 2023
We know that mitigation saves. Why aren’t we doing it? 3 reasons
A system of multi-party resilience incentives
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October 12, 2023
1. Mitigation imposes costs on some and benefits others
Retrofit cost = $5,000
Total benefit = $25,000
Societal benefit-cost ratio = 5:1
Insured owner’s benefit ≈ $0
Insured owner’s benefit-cost ratio = 0
A system of multi-party resilience incentives
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October 12, 2023
2. Co-beneficiaries have not collaborated to promote resilience
A system of multi-party resilience incentives
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October 12, 2023
Cities help pay for basement flood protection
A system of multi-party resilience incentives
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October 12, 2023
Higher resale & rental value, faster leasing
A system of multi-party resilience incentives
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Coordinated monetary incentives can align stakeholder interests
A system of multi-party resilience incentives
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October 12, 2023
| Cost | Benefit | BCR |
Owner | $0 | ? | |
Insurers | $2,000 | $10,000 | 5 |
Governments (grants) | $2,600 | $13,000 | 5 |
Lenders (points) | $400 | $2,000 | 5 |
Sum | $5,000 | $25,000 | 5 |
3. Emotion can outweigh facts and logic
A system of multi-party resilience incentives
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October 12, 2023
Three ingredients for a pilot test
A system of multi-party resilience incentives
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October 12, 2023
Let’s talk now about how to assemble these ingredients
Chris Chopik
Rebecca Denlinger
Don Iveson
Andrew Pape-Salmon
A system of multi-party resilience incentives
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October 12, 2023