Disaster Insurance or a Disastrous Insturance - Natural Disaster Insurance in France
AbstractWe model natural disaster insurance in France. We explicitly take into account the main institutional features of the system, such as the uniform premium rate in both high and low risk regions and the existence of a state reinsurance company. Our model indicates that the institutional set-up is fundamentally flawed. We find that the market is likely to lead to “specialist” equilibria, where insurers specialize in serving either high or low risk regions. As a result the reinsurance company, which offers cover to all insurers at the same price, is likely to suffer from a portfolio with mainly “bad” risks. We show that increasing the premium rate customers have to pay, a policy undertaken by the French authorities, will not necessarily solve these problems and comes at a high cost to the final consumer (and taxpayer).
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Bibliographic InfoPaper provided by McMaster University in its series Department of Economics Working Papers with number 2004-13.
Length: 45 pages
Date of creation: 2004
Date of revision:
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Other versions of this item:
- Mario JAMETTI & Thomas VON UNGERN-STERNBERG, 2004. "Disaster Insurance or a Disastrous Insurance - Natural Disaster Insurance in France," Cahiers de Recherches Economiques du DÃ©partement d'EconomÃ©trie et d'Economie politique (DEEP) 04.12, Université de Lausanne, Faculté des HEC, DEEP.
- Mario Jametti & Thomas von Ungern-Sternberg, 2004. "Disaster Insurance or a Disastrous Insurance – Natural Disaster Insurance in France," CESifo Working Paper Series 1303, CESifo Group Munich.
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy-Making and Implementation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-10-21 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dwight M. Jaffee & Thomas Russell, 1996. "Catastrophe Insurance, Capital Markets and Uninsurable Risks," Center for Financial Institutions Working Papers 96-12, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Mario Jametti & Thomas von Ungern-Sternberg, 2006.
"Risk Selection in Natural Disaster Insurance - the Case of France,"
2006_1, York University, Department of Economics.
- Mario JAMETTI & Thomas VON UNGERN-STERNBERG, 2006. "Risk Selection in Natural Disaster Insurance -The Case of France," Cahiers de Recherches Economiques du DÃ©partement d'EconomÃ©trie et d'Economie politique (DEEP) 06.02, Université de Lausanne, Faculté des HEC, DEEP.
- Mario Jametti & Thomas von Ungern-Sternberg, 2006. "Risk Selection in Natural Disaster Insurance – the Case of France," CESifo Working Paper Series 1683, CESifo Group Munich.
- Mario Jametti & Thomas von Ungern-Sternberg, 2010.
"Risk Selection in Natural-Disaster Insurance,"
Journal of Institutional and Theoretical Economics (JITE),
Mohr Siebeck, Tübingen, vol. 166(2), pages 344-364, June.
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