Risk Selection in Natural Disaster Insurance - the Case of France
AbstractIt is widely recognized that “market failure” prevents e¢ cient risk sharing in natural disaster insurance. As a consequence, many countries adopted institutional frameworks involving public-private partnerships”. We de…ne risk selection as a situation where private companies pass insurance of high risk agents on to the public sector. We argue that this is a potentially important issue in such partnerships, illustrating our concerns with the case of France. We build a simple model that incorporates the main features of the system, such as the risk independent premium rate and the existence of a state reinsurer. We show that in our model, risk selection is likely to be present in equilibrium and discuss the policy options available. We …nd that the "stylized facts" of the French system correspond to our results. Additionally, the policies implemented by the gvernment correspond to policies characterized to reduce the potential of risk selection.
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Bibliographic InfoPaper provided by York University, Department of Economics in its series Working Papers with number 2006_1.
Length: 20 pages
Date of creation: Oct 2006
Date of revision:
Risk selection; property insurance; reinsurance; Franc;
Other versions of this item:
- 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.
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
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- repec:ner:dauphi:urn:hdl:123456789/167 is not listed on IDEAS
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