Risk Transfer 10
Risk Transfer 10 : The process of spreading or transferring the costs of risk whereby a potentially affected nation, enterprise or group can obtain resources from another party when a disaster strikes, in exchange for ongoing or compensatory social or financial benefits provided to that party. Comment: Risk transfer comes at a price; it is an exchange of resources. For example, to obtain insurance cover for a risk, it is necessary to pay premiums to the insurer. If help is received from a family member after a disaster, it will be accompanied by expectations of return help if needed in future. Public social safety nets are funded from taxation. At a larger scale, Governments, insurers and other major risk-bearing entities may establish mechanisms to cover losses in major events, such as re-insurance, catastrophe bond issues, credit facilities and reserve funds, where the costs are covered by premiums, bond discount prices, interest rates and past savings, respectively. (ISDR)
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