A Novel Disaster Insurance Model With Capacity Reservation for Public–Private Collaboration

Enhancing intraregional disaster preparedness and response capabilities is crucial for effectively managing noncatastrophic disasters in localized areas. This paper proposes a primary governmental strategy focused on signing disaster insurance contracts with capacity reservation, alongside two supplementary strategies: building predisaster stockpiles and spot market procurement. Among these, our focus is on developing a comprehensive disaster insurance model with capacity reservation functionality, which integrates both financial and operational elements to facilitate public-private collaboration. Using game-theoretical modeling, we analyze government-insurer interactions, with solutions derived through backward induction. The model is validated through a case study in China, focusing on the response of S Government and W Company to Typhoon Rumbia. The results offer a series of important insights. Zero-deductible contracts, though unconventional, emerge as an optimal mechanism in localized disasters by minimizing entry barriers and sustaining insurer profitability. For insurers, long-term cooperation is more attractive in low-volatility, short-duration events, as it enhances capacity amortization and operational efficiency. Meanwhile, policyholders exhibit highly context-sensitive behavior, with stockpiling decisions shaped by lead time, spot market prices, and disaster characteristics. The model uncovers distinct preparedness thresholds that support flexible, scenario-specific strategies, advancing the theory and practice of disaster readiness for regional governments.