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Incentive contract designs on an index-based catastrophe insurance in humanitarian logistics with deprivation cost
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DOI：10.1007/s12063-026-00611-1.png)
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Abstract
En 中文
Large-scale disasters and catastrophic events pose a high risk of shortages in humanitarian funding. Recently, a novel form of index-based catastrophe insurance has been proposed to offer an advanced risk-sharing mechanism by providing financial liquidity for relief organizations during the disaster response stage. However, although it bypasses the complicated process of loss estimation, delays in insurance payouts may still occur, which greatly reduce the effectiveness of risk mitigation. To address this problem, we design an incentive contract as a supplementary agreement to index-based catastrophe insurance between a local authority and an insurance company, and use deprivation cost to measure the effectiveness of risk mitigation in disaster relief. By constructing a Stackelberg game model, we derive the optimal incentive coefficient for the local authority and the optimal claim settlement time for the insurance company, thereby achieving a win–win situation. To further evaluate the feasibility and optimality of this contract, we compare it with a reserve pooling strategy. The applicability of the proposed contract is validated using empirical evidence from Shenzhen, China. The findings indicate that the incentive mechanism operates effectively in practice and significantly enhances risk mitigation performance. Moreover, its advantages become increasingly pronounced under severe disaster scenarios and over an extended planning horizon.
Keywords:
Humanitarian logistics
Risk mitigation
Catastrophe insurance
Incentive contract
Deprivation cost
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5.3
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46
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