Integrating Disaster Risks: A Comprehensive Catastrophe Risk Assessment Model and Its Empirical Validation

Abstract

The increasing frequency and severity of catastrophic events worldwide highlight the urgent need for the insurance sector to enhance risk assessment strategies. This study introduces a novel Catastrophe Risk Assessment Model that integrates three critical dimensions of risk: disaster-causing factors, disaster-bearing carriers, and disaster-pregnant environments. Utilizing the Grey System Theory and the Entropy Weight Method (G2-EWM), the model evaluates 11 indicators to assess the profitability for insurance companies (Q_profitability) and affordability for property owners (Q_affordability). An empirical analysis across ten randomly selected regions demonstrates the model's effectiveness, with a Pearson correlation coefficient of 0.8342 validating its accuracy. This research offers a comprehensive framework for understanding and managing catastrophe risk, providing valuable insights for insurance companies and policymakers to enhance risk management strategies and develop more tailored insurance products. By addressing the multi-dimensional nature of disasters, the model aims to contribute to the resilience of communities and economies against catastrophic events.