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AbstractMany risks we face today will very likely not stay the same over time. For example, it is expected that climate change will alter future risks of natural disaster events considerably and, as a consequence, current risk management and governance strategies may not be effective anymore. Large ambiguities arise if future climate change impacts should be taken into account for analyzing risk management options today. Risk insurance, while albeit only one of many risk management actions possible, plays an important role in current societies for dealing with extremes. A natural starting point for our analysis is therefore the question of how ambiguity may be incorporated in a world with changing risks. To shed light on this question, we study how ambiguity can affect the uptake of insurance and risk mitigation within a risk‐layer approach where each layer is quantified using distortion risk measures that should reflect the risk aversion of a decisionmaker toward extreme losses. Importantly, we obtain a closed‐form solution for such a problem statement which allows an efficient numerical implementation. We apply this model to a case study of drought risk for Austrian farmers and address the question how ambiguity will affect the risk layers of different types of farmers and how subsidies may help to deal with current and future risks. We found that especially for small‐scale farmers the consequences of increasing risk and model ambiguity are pronounced and subsidies are especially needed in this case to cover the high‐risk layer.

Climate-related disaster risks pose a threat to sustainable development today and in the future. Major global agendas, such as the Sendai Framework for Disaster Risk Reduction and the Sustainable Development Goals, address ways of developing effective management strategies for tackling such risks. Risk management is increasingly focusing on low probability but high impact events, next to the more traditional attention on expected losses. We focus on urban riverine flood risk across 200 countries for today, 2030, and 2080, and develop a risk-threshold approach for identifying whether a country is exposed to risk of extreme events and, if so, when and how much. Furthermore, we apply a risk-layer approach to delineate the kinds of risk reduction or financing instruments that may be needed to manage emerging risks at the national level. Based on these country-level results, we analyze the macroeconomic consequences of setting up a global fund as one international option for coping with floods today and in the future. An additional macroeconomic analysis of different funding schemes for capitalizing the global fund provides insights into linking national risk management efforts with global efforts to manage risks. The global fund could be capitalized according to different equality principles. Our results provide an argument for an equity-based capitalization principle rather than a risk-based one, as the former makes damages at the local level a global responsibility.

Climate-related disaster risks pose a threat to sustainable development today and in the future. Major global agendas, such as the Sendai Framework for Disaster Risk Reduction and the Sustainable Development Goals, address ways of developing effective management strategies for tackling such risks. Risk management is increasingly focusing on low probability but high impact events, next to the more traditional attention on expected losses. We focus on urban riverine flood risk across 200 countries for today, 2030, and 2080, and develop a risk-threshold approach for identifying whether a country is exposed to risk of extreme events and, if so, when and how much. Furthermore, we apply a risk-layer approach to delineate the kinds of risk reduction or financing instruments that may be needed to manage emerging risks at the national level. Based on these country-level results, we analyze the macroeconomic consequences of setting up a global fund as one international option for coping with floods today and in the future. An additional macroeconomic analysis of different funding schemes for capitalizing the global fund provides insights into linking national risk management efforts with global efforts to manage risks. The global fund could be capitalized according to different equality principles. Our results provide an argument for an equity-based capitalization principle rather than a risk-based one, as the former makes damages at the local level a global responsibility.

This article maps the emergence of a risk–gang nexus in the Swedish correctional field. Using the concept of penal layering, the article analyses the configuration of risk-based practices to manage gang affiliates in the context of Swedish prison and probation services. By introducing the notion interludes of penal layering, this article stresses the synchronic/diachronic opposition in penal change processes and furthers ongoing discussions of the variegated, braided, and uneven patterns of penal change in and beyond Nordic penal institutions. Drawing on interviews with probation officers, prison staff, and other professionals working with gangs in Sweden, the study finds that new rules, practices, decisional hierarchies, and actors have been layered on top of or alongside existing institutional arrangements to manage gang affiliates. This penal layer enforces punitive conditions for incarcerated gang affiliates and creates tensions, agonism, and contradictions between the coexisting and multiple logics of rehabilitation, punishment, and risk in the penal field.

Cover -- Title -- Copyright -- Contents -- Tables, Figures, and Boxes -- Acknowledgments -- Currency Equivalent -- Abbreviations -- Executive Summary -- 1. Introduction -- 1.1 Background -- 1.2 Risk Layering Approach -- 1.3 Country Diagnostics Methodology -- 2. The Public Sector Disaster Risk Financing Landscape -- 2.1 Landscape Overview -- 2.2 Diagnostic and Recommended Actions -- 3. Diagnostic on the Current Availability and Use of Insurance, Reinsurance, and Capital Market Solutions for Disaster Risk Financing -- 3.1 Government Policy -- 3.2 Credibility of the Private Sector Offering Risk Transfer Solutions -- 3.3 Product Availability and Affordability -- 3.4 Social Protection -- 4. The Rating Summary and Recommended Main Actions -- 4.1 Gaps in, and Recommendations for, Government Policy -- 4.2 Gaps in, and Recommendations for, Credibility in the Insurance Sector and the Capital Markets -- 4.3 Gaps in, and Recommendations for, Products -- 4.4 Gaps in, and Recommendations for, Social Protection -- 4.5 Gaps in, and Recommendations for, Economic and Other Preconditions -- 4.6 Gaps in, and Recommendations for, Unlicensed Competition -- APPENDIX: Key Learnings from International Experience in Agricultural Insurance -- References.

Due to its popularity, the term layering is often used generically, and it risks being transformed into a catch‐all concept. Layering has become synonymous with incremental change, thus making it a synonym for change without any specification in terms of the change and its effects. To make the term more conceptually coherent and empirically useful, this article problematizes the historical neo‐institutionalist definition of layering as a mode of change and, above all, its use in the literature. It argues that layering should be conceptualized in terms of modes of institutional design through which different types of additions to the actual institutional arrangement can be activated to pursue not only institutional and eventually policy change but also stability. As an approach to institutional design, layering can be distinguished according to that which is layered and the results that layering can achieve in terms of institutional and policy effects.

This study presents options for a national disaster risk financing strategy in Indonesia, drawing heavily on international experience. The study discusses a series of complementary options for a national disaster risk financing strategy, based on a preliminary fiscal risk analysis and a review of the current budget management of natural disasters in Indonesia. It benefits from the international experience of the World Bank, which has assisted several countries in the design and implementation of sovereign catastrophe risk financing strategies. The rehabilitation and reconstruction fund is the main budget instrument for the Government of Indonesia (GoI) to finance public post-disaster expenditures, but it is under-capitalized. This study presents an optimal combination of risk-retention and risk transfer instruments that could help the GoI increase its immediate financial response capacity against natural disasters and better protect its fiscal balance. Building on the three-tier risk layering approach promoted by the World Bank and the preliminary fiscal risk assessment analysis, the following financial strategy could be considered by the GoI. This strategy would provide the GoI with access to immediate liquidity in the aftermath of a disaster at a competitive cost. The strategy would allow the GoI to access up to US$1.8 billion liquidity in the aftermath of a disaster in order to finance immediate post-disaster expenditures, such as grants for livelihood and low income housing reconstruction. Preliminary disaster fiscal risk assessment analysis shows that this would protect the GoI against disasters occurring every 100 years. The implementation of a national disaster risk financing strategy would require significant institutional capacity building.

Coordination and layering of models to identify risks in complex systems such as large‐scale infrastructure of energy, water, and transportation is of current interest across application domains. Such infrastructures are increasingly vulnerable to adjacent commercial and residential land development. Land development can compromise the performance of essential infrastructure systems and increase the costs of maintaining or increasing performance. A risk‐informed approach to this topic would be useful to avoid surprise, regret, and the need for costly remedies. This article develops a layering and coordination of models for risk management of land development affecting infrastructure systems. The layers are: system identification, expert elicitation, predictive modeling, comparison of investment alternatives, and implications of current decisions for future options. The modeling layers share a focus on observable factors that most contribute to volatility of land development and land use. The relevant data and expert evidence include current and forecasted growth in population and employment, conservation and preservation rules, land topography and geometries, real estate assessments, market and economic conditions, and other factors. The approach integrates to a decision framework of strategic considerations based on assessing risk, cost, and opportunity in order to prioritize needs and potential remedies that mitigate impacts of land development to the infrastructure systems. The approach is demonstrated for a 5,700‐mile multimodal transportation system adjacent to 60,000 tracts of potential land development.

The human and economic toll of the coronavirus disease 2019 (COVID-19) pandemic and the unknowns regarding the origins of the virus, with a backdrop of enormous advances in technologies and human understanding of molecular virology, have raised global concerns about the safety of the legitimate infectious disease research enterprise. We acknowledge the safety and security risks resulting from the broad availability of tools and knowledge, tools and knowledge that can be exploited equally for good or harm. The last 2 decades have shown us that the risks are real. They have also shown us that more traditional top-down regulations alone are not the answer. We encourage government to be thoughtful and nuanced in dealing with this significant challenge and to carefully consider human factors and the important role of organizational-level leadership before simply layering an additional bureaucratic burden on the enterprise without understanding value and cost.

This paper presents how the approaches to flood risk in Poland have evolved over the last 25 years. The reliance on structural defence and on the state as the key responsible actor was challenged by four triggering events: two large floods; the collapse of the communist system; and the European Union accession. The paper reveals that (1) the radical transformation of the political system did not lead to significant changes in flood risk governance; (2) changes in response to disastrous floods are incremental. Despite the pressures, the Polish flood risk governance preserved its core functional characteristics. Until the 1997 flood, it exhibited the exhaustion mode of institutional dynamics, with issue marginalisation and poor financing, while after this flood, the layering‐type mode prevailed, where innovative ideas were accommodated by the established system. The analysis of the Polish flood risk governance dynamics suggests that changes cannot be taken for granted, even facing significant pressures and windows of opportunities.

Uninsured risk had far-reaching consequences for rural growth as well as poverty reduction. A range of informal mechanisms to insure rural households against the impact of shocks, but they are a modest component of a risk layering strategy for well-off households and even less protective for low-income households. Formal insurance mechanisms have inherent market imperfections. State interventions to address these limitations have proven costly and generally are targeted poorly. Recent developments in microfinance as well as in insurance marketing have opened new possibilities for household risk reduction. Index insurance, such as weather indexing, addresses other inherent problems in insurance by using an indicator that is not affected by individual behaviour and may address monitoring costs and moral hazard. A number of innovations using index insurance are being tried currently in diverse settings ranging from India to Mongolia to Malawi. Marketing costs may limit the provision of such insurance to small farmers, but even in such cases microfinance institutes may serve as market intermediaries. Moreover, state and submational governments can use insurance to achieve countercyclical funding programs. In this vein, municipal governments in Mexico have used insurance to finance disaster contingency while the World Food Program has insured a portion of its emergency assistance to Ethiopia. Humanitarian organizations and NGOs may also seek insurance in this manner.

Paper I, "The Liability Regime of Insurance Pools and Its Impact on Pricing", addresses the pricing of insurance premiums for specific forms of risk sharing in the insurance industry. The implicit diversification effect from this risk sharing on the default risk is discussed in connection with a possible joint liability of the co-insurers. The discussion focuses in particular on the risk-adequate premium in a contingent claims approach under various premises, which incidentally reflects the varying effectiveness of the joint liability mechanism to protect the policyholder from the adverse consequences of insolvencies in the risk sharing arrangement. Paper II, "Sometimes More, Sometimes Less: Prudence and the Diversification of Risky Insurance Coverage", considers in a three-state model the optimal level of insurance coverage for a risk-averse policyholder who can split by assumption the insurance policy, and hence the default risk, between several insurance companies. The results indicate whether more diversification by an increased number of insurers entails normatively more or less insurance coverage and how this depends on the insurers' default correlation as well as the policyholder's degree of prudence. Given a model with a continuous loss distribution, Paper III, "Optimal Management of Counterparty Risk in Reinsurance Contracts", derives optimal strategies for a risk-averse primary insurer to manage the counterparty risk in reinsurance contracts. The range of strategies comprises explicit hedging, diversification with two reinsurers, or a mixture of both. In view of the trade-off between costs and security the results suggest a layering of the reinsurance coverage with a layer-specific application of the different risk management instruments. While Paper II and III rest on the assumption of a non-stochastic loss given default, Paper IV, "Tailing the Tail: Insurance Demand, Default Risk, and a Random Loss Given Default", eases this assumption by introducing a random variable for the loss given default and researches the according effects on the optimal level of insurance coverage. In addition, a distribution of the loss given default is fitted from empirical data referring concurrently to the difficulties involved.