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Assurance des catastrophes naturelles : faut-il choisir entre prévention et solidarité ?

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  • Laure Latruffe
  • Pierre Picard

Abstract

This paper investigates the trade-off between solidarity and incentives to prevention in the insurance of natural disasters. Our strating point is the French indemnification system for natural disasters governed by the Law of 13 July 1982: in order to assert the solidarity of the nation with high risk individuals, all property insureds have to pay a socalled cat-nat premium. The amount of this premium is set by the Government and it does not depend on incurred risk, which strongly reduces the efficiency of prevention incentives. We establish a condition under which the liberalization of the market for natural disaster insurance associated with compensatory transfers would lead to a Pareto improvement, although individual prevention costs are unobservable. We characterize the trade-off between prevention and solidarity which follows from such a policy and we show that it dominates incentives through deductibles. Finally we also show that our results still hold in a setting where there is an asymmetry of information about individual risks between insureds on one side and insurers and the Government on the other side.

Suggested Citation

  • Laure Latruffe & Pierre Picard, 2005. "Assurance des catastrophes naturelles : faut-il choisir entre prévention et solidarité ?," Annals of Economics and Statistics, GENES, issue 78, pages 33-56.
    • Handle: RePEc:adr:anecst:y:2005:i:78:p:33-56
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    File URL: http://www.jstor.org/stable/20079127
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    Cited by:

    1. Richert, Claire & Erdlenbruch, Katrin & Grelot, Frédéric, 2019. "The impact of flood management policies on individual adaptation actions: Insights from a French case study," Ecological Economics, Elsevier, vol. 165(C), pages 1-1.
    2. repec:dau:papers:123456789/5518 is not listed on IDEAS
    3. Pierre Picard, 2008. "Natural Disaster Insurance and the Equity‐Efficiency Trade‐Off," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 75(1), pages 17-38, March.
    4. Véronique Le Bihan & Sophie Pardo, 2010. "Les limites de la couverture des risques en aquaculture : le cas des conchyliculteurs en France," Working Papers hal-00527115, HAL.
    5. Bihan, Veronique Le & Pardo, Sophie, 2012. "La couverture des risques en aquaculture. Une réflexion sur le cas de la conchyliculture en France," Économie rurale, French Society of Rural Economics (SFER Société Française d'Economie Rurale), vol. 329(May-June).
    6. Michel-Kerjan Erwann & de Marcellis-Warin Nathalie, 2006. "Public-Private Programs for Covering Extreme Events: The Impact of Information Distribution on Risk-Sharing," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 1(2), pages 1-30, February.
    7. Céline Grislain-Letrémy & Sabine Lemoyne de Forges, 2011. "Coordinating Flood Insurance and Collective Prevention Policies: A Fiscal Federalism Perspective," Working Papers 2011-07, Center for Research in Economics and Statistics.
    8. Grislain-Letrémy, Céline, 2012. "Assurance et prévention des catastrophes naturelles et technologiques," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/9073 edited by Villeneuve, Bertrand.

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