Natural and human-created disasters will increase with population and global warming. To recover from disasters requires Capital, and the insurance industry cannot handle the increased demand. Resilience needs more efficient and lower-cost sources of Capital and needs communities to organise locally to match Capital with local needs.
Insurance works by collecting and storing Capital for later use. In effect, it puts away money to rebuild assets. For a sustainable insurance industry to work, claims need to be covered by the earnings on stored money. It means a large amount of stored money (Capital) is not available for other purposes but is tied up waiting for a disaster. The approach works when insurance claims are a small percentage of the total amount insured and come in a continuous stream of small claims. It does not work when there are many claims in a small time frame, such as a major disaster.
Another strategy to provide money is just-in-time money. The reserve bank creates just-in-time money by quantitative easing. The main difference is the money goes directly to communities impacted by the disaster rather than the banks.
Outline of Community Capital for Disaster Resilience
Let us assume a bush fire destroys 50% of the homes in a community. The bush fire also destroys community property like bridges, schools, electricity, water, businesses and meeting places. The whole community forms a cooperative, and the government agrees to provide funds, as needed, by creating new money to rebuild the community. The value created is the same as the destroyed Community Capital. The community agrees to repay the funds, and the government agrees not to charge interest on the money.
The community puts the money it receives from the Federal government into Consumer (Community) Capital. The money is only spent on capital works that the community owns collectively. How much directly benefits individuals is determined by the pre-disaster value of the assets before the disaster. The immediate money needs of the community members are through normal social security processes.
The priority will be for community members to have housing supplied from a national pool of mobile units held in storage for emergencies and in utilising unused beds in undamaged or partially damaged houses in the disaster area. All occupants will pay 25% of their post-disaster income to live in the housing, and each rental payment will accumulate housing capital for the occupant. The temporary housing returns to the pool and the community will have accrued equity in the temporary housing.
While living in the mobile units, the community members will arrange for their new dwelling to be repaired or rebuilt, starting with the original Capital. The rebuilt housing and businesses will have extra costs associated with building resilience. More Community Capital will come from residents, super funds and banks.
Importantly the community will legally own the reconstructed community. Still, individuals will have equity in the places they occupy to have the same legal rights to the tenancy as they did with ownership rights. Because the community owns the infrastructure, including dwellings, it takes on reconstructing the community assets. The government will supply mentors and advisors to help organise, liaise with government departments, and govern the community.
Communities can opt to set up their Community Capital arrangement before a disaster. Instead of Community members paying insurance, they will pay the money to the community. They will work on disaster mitigation plans and Capital works to reduce the costs of potential disasters if they occur.
It is inevitable that large areas of Australia currently inhabited will become uninhabitable due to excessive heat, rising sea levels, bush fire damage, and floods. The approach using Community Capital can start moving populations and rebuilding and making resilient communities. Redirected insurance payments will help supply the Capital and accelerate the utilisation of existing Capital by removing debt and ensuring Capital Gains go to the communities that created the gains.
