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The Benefits of Uniform Flood Insurance*

Author

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  • Céline Grislain-Letrémy

    (CREST and University Paris-Dauphine.)

  • Sabine Lemoyne de Forges

    (Ecole Polytechnique and AgroParis Tech ENGREF.)

Abstract

Prevention policies against flood, such as dams or levees, are commonly designed by local jurisdictions and for most, they exert externalities on neighbouring jurisdictions. We study a model in which each jurisdiction chooses its collective prevention effort depending on the flood risk and on the insurance system that covers its inhabitants. As compulsory uniform insurance depends on all insureds’ risk, it enables partial integration of prevention externalities by jurisdictions. We determine under which conditions compulsory uniform insurance Pareto dominates risk-rated insurance.

Suggested Citation

  • Céline Grislain-Letrémy & Sabine Lemoyne de Forges, 2015. "The Benefits of Uniform Flood Insurance*," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 40(1), pages 41-64, March.
    • Handle: RePEc:pal:genrir:v:40:y:2015:i:1:p:41-64
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    References listed on IDEAS

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    1. 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.
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    Cited by:

    1. Céline Grislain-Letrémy, 2018. "Natural Disasters: Exposure and Underinsurance," Annals of Economics and Statistics, GENES, issue 129, pages 53-83.
    2. Xie, Yang & Zilberman, David, 2018. "Implications of Spatial Externality of Flood Control: Land Reclamation, Wetland Reservation, and Investment in Flood Control Facilities," 2018 Annual Meeting, August 5-7, Washington, D.C. 274445, Agricultural and Applied Economics Association.

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