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SOME FINANCIAL SCENARIOS FOR RECOVERY OF NATURAL DISASTER DAMAGES BASED ON INSURANCES AND CREDITS
Abstract
The aim of the paper is to propose some financial scenarios for recovery of natural disaster damages based on insurances and credits. In recent years, there has been an increase in the frequency and severity of natural disasters worldwide. It is well known that natural disasters can affect companies by damaging or completely destroying their material assets. This leads to a partial or complete economic activity interruption of the affected companies. The study focuses on the direct material damage to the companies caused by natural disasters (floods, earthquakes, landslides, storms, etc.). Companies usually insure their assets against natural disasters. However, there are companies possessing assets of significant volume whose insurance require material expenses. So, such companies may choose to insure their basic assets such as machinery and equipment and to consider non-insurance of other assets such as specific warehouses, insignificant inventory, etc. Insuring these assets means actual expenses but there may occur no natural disaster. However, if a natural disaster occurs and these assets are not covered by insurance, then the companies may be required to obtain credits and incur certain expenses such as interests, charges and commission fees. The study analyses some financial scenarios for recovery of natural disaster damages based on insurances and credits by comparing their advantages and disadvantages in terms of profits of different types of companies. The obtained research results will be especially useful for the financial management of the companies.
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