This final chapter demonstrates how the catastrophe (CAT) models described in previous chapters can be used as inputs for CAT risk management. CAT model outputs, which can translate into actionable strategies, are risk metrics such as the average annual loss, exceedance probability curves, and values at risk (as defined in Chapter 3). Practical applications include risk transfer via insurance and CAT bonds, as well as risk reduction, consisting of reducing exposure, hazard, or vulnerability. The forecasting of perils (such as tropical cyclones and earthquakes) is explored, as well as strategies of decision-making under uncertainty. The overarching concept of risk governance, which includes risk assessment, management, and communication between various stakeholders, is illustrated with the case study of seismic risk at geothermal plants. This scenario exemplifies how CAT modelling is central in the trade-off between energy security and public safety and how large uncertainties impact risk perceptions and decisions.

In this chapter, we review the different methods available to a firm that wants to transfer risk. First, we consider the traditional route of insurance, or reinsurance. We describe the different types of insurance contracts, and analyse their advantages and disadvantages. We then consider captive insurance companies, which are insurance companies that are owned by the organization that is transferring risk. Next, we discuss securitization of risk, where risk is packaged into investments that are sold off in the capital markets. One of the most interesting examples of securitized insurance risk is the catastrophe bond, or cat bond. We also look at examples of securitization of demographic risk, through pandemic bonds and longevity derivatives.

The chapter examines the legal and extra-legal difficulties in eliminating military objectives. It also attempts to verify the claim,often made in literature on the subject, that civilians account for the majority of victims of armed conflict. The review of legal complexities begins with the examination of the principle of proportionality, the requirement to take appropriate cautionary measures, and the prohibition of reprisals. Extra-legal difficulties include the following issues: the shift in the nature of contemporary armed conflict; the tendency to protect one’s own troops at the expense of other goals; the trend to deliberately attack populations perceived as vulnerable; using gender as a potential cause for targeting; insufficient precision of weapons used in action; and difficulty in obtaining reliable information on the status of a person or object.