Risk management strategies for managing natural disaster risks: A case study in Shiraz City, Iran

Almost all parts of Iran are seismic hazard prone areas and due to the low quality of constructions as well the increase of exposure in urban areas, recent earthquake events caused unacceptable huge losses, both in human and economic terms. To assess the resilience of various risk bearers, including the government as well as private sector entities, the resources to cope with potential future events as well as possible interdependencies during the occurrence have to be analyzed in detail. Furthermore, to pro-actively act against possible future extremes with risk hedging instruments such as insurance, the underlying risk has to be determined in quantitative manner. This paper suggest how to combine both, the coping dimension as well as the risk dimension, to determine possible risk management strategies which may be feasible in the Iranian context. The focus is specifically on risk instruments, such as insurance, for the Shiraz region in Iran, where the newly produced probabilistic loss estimates are available which are subsequently used to analyze possible insurance schemes and for determining corresponding premium payments as well as affordability. The paper discusses how such risk instruments can be embedded within an integrated framework and which additional options, such as risk reduction or risk pooling, would be beneficial to lower premiums to affordable levels.