Optimal Catastrophe Insurance with Multiple Catastrophes
AbstractThis paper adopts a normative approach to catastrophe insurance. It addresses the question of how innovations in the design of insurance contracts could help resolve the capacity gap in the provision of insurance against natural catastrophes. It extends previous research with the same approach first by considering the case of "uncorrelated catastrophes", and second by combining the influence of catastrophes on claims amounts (severity risk) and on the probability of loss (frequency risk). We show that the menu of contracts proposed in previous research, where only one type of catastrophe is considered, is dominated by the menu of contracts proposed in this paper, taking into account the absence of correlation between catastrophes of different kinds.
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Bibliographic InfoPaper provided by International Center for Financial Asset Management and Engineering in its series FAME Research Paper Series with number rp7.
Date of creation: Sep 1999
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- Sam Cole, 2010. "The regional portfolio of disruptions, protection, and disasters," The Annals of Regional Science, Springer, vol. 44(2), pages 251-272, April.
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